UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14377
Krupp Realty Limited Partnership-VII
Massachusetts 04-2842924
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(617) 423-2233
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KRUPP REALTY LIMITED PARTNERSHIP-VII
<TABLE>
BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1994 1993
Multi-family apartment complexes, net of
accumulated depreciation of $8,236,459
<S> <C> <C>
and $7,820,288, respectively $ 9,993,591 $10,349,433
Retail center, net of accumulated
depreciation of $2,702,805 and $2,513,207,
respectively 6,861,919 7,046,517
Total real estate assets 16,855,510 17,395,950
Cash 931,808 840,798
Cash restricted for tenant security deposits 54,525 61,363
Cash restricted for capital improvements 60,035 57,748
Prepaid expenses and other assets (Note 2) 520,792 327,862
Deferred expenses, net of accumulated
amortization of $6,173 and $259,055,
respectively (Notes 2 and 3) 201,254 45,975
Total assets $18,623,924 $18,729,696
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable (Note 3) $12,889,034 $12,682,032
Other liabilities 726,792 824,861
Total liabilities 13,615,826 13,506,893
Commitment (Note 3)
Partners' equity (Note 4) 5,008,098 5,222,803
Total liabilities and partners' equity $18,623,924 $18,729,696
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-2-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Revenue:
<S> <C> <C> <C> <C>
Rental income $1,065,111 $1,372,679 $2,094,554 $2,725,525
Interest income 5,683 5,706 11,299 10,482
Total revenue 1,070,794 1,378,385 2,105,853 2,736,007
Expenses:
Operating (including
reimbursements to affiliates
of $42,068, $60,653, $83,138
and $121,158, respectively) 299,970 437,954 587,111 870,807
Maintenance 86,483 223,732 137,239 330,967
Real estate taxes 98,502 140,981 205,226 271,954
Management fees to an affiliate 47,444 61,166 88,381 123,925
Depreciation and amortization 344,249 381,430 657,918 756,743
Interest 300,133 410,933 600,519 821,739
General and administrative
(including in reimbursements
to affiliates of $12,901,
$12,801, $25,834 and $25,674,
respectively) 23,552 35,006 44,164 42,437
Total expenses 1,200,333 1,691,202 2,320,558 3,218,572
Net loss $ (129,539) $ (312,817) $ (214,705) $ (482,565)
Allocation of net loss (Note 4):
Per Unit of Investor
Limited Partnership Interest
(27,184 Units outstanding) $ (4.72) $ (11.39) $ (7.82) $ (17.57)
General Partners $ (1,295) $ (3,129) $ (2,147) $ (4,826)
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-3-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months
Ended June 30,
1994 1993
Operating activities:
<S> <C> <C>
Net loss $ (214,705) $(482,565)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 657,918 756,743
Interest accumulated, not paid - 59,407
Decrease in cash restricted
for tenant security deposits 6,838 2,875
Decrease (increase) in prepaid expenses
and other assets (192,930) 65,236
Decrease in accrued expenses
and other liabilities (98,069) (19,685)
Net cash provided by operating activities 159,052 382,011
Investing activities:
Additions to fixed assets (65,329) (136,262)
Decrease (increase) in cash restricted for
capital improvements (2,287) 6,232
Net cash used for investing activities (67,616) (130,030)
Financing activity:
Increase in deferred expenses (207,428) -
Principal payments on mortgage notes payable (75,027) (77,214)
Proceeds from refinancing mortgage note payable 5,300,000 -
Payoff of mortgage note payable (5,017,971) -
Net cash used for financing activities (426) (77,214)
Net increase in cash 91,010 174,767
Cash, beginning of period 840,798 387,512
Cash, end of period $ 931,808 $ 562,279
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-4-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
in this report on Form 10-Q pursuant to the Rules and
Regulations of the Securities and Exchange Commission. In the
opinion of The Krupp Corporation and The Krupp Company Limited
Partnership-II, the General Partners of Krupp Realty Limited
Partnership-VII (the "Partnership"), the disclosures contained
in this report are adequate to make the information presented
not misleading. See Notes to Financial Statements included in
the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1993 for additional information relevant to
significant accounting policies followed by the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited financial statements reflect all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the Partnership's financial
position as of June 30, 1994, its results of operations for the
three and six months ended June 30, 1994 and 1993 and its cash
flows for the six months ended June 30, 1994 and 1993. Certain
prior year balances have been reclassified to conform with
current year financial statement presentation.
The results of operations for the three and six months ended
June 30, 1994 are not necessarily indicative of the results
which may be expected for the full year. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in this report.
2. Related Party Transactions
Amounts paid to affiliates of the General Partners during the
six months ended June 30, 1994 and for the year ended December
31, 1993 for costs related to refinancing activities of the
Partnership's mortgage notes were $15,613 and $7,568,
respectively.
3. Mortgage Notes Payable
On April 13, 1994, the Partnership, completed the refinancing
of Windsor Apartments. The property was refinanced with a
$5,300,000 non-recourse mortgage note payable at the rate of
9.25% per annum with monthly principal and interest payments
of $43,602, based on a 30 year amortization schedule. The
mortgage note, which is collateralized by the property, matures
on May 1, 2001 at which time the remaining principal
(approximately $4,977,000) and any accrued interest are due.
After October 13, 1997, the note may be prepaid subject to a
prepayment penalty. The Partnership utilized the proceeds to
repay the prior mortgage note with a remaining balance of
$5,017,971 and to pay refinancing costs of $207,428.
Continued
-5-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
NOTES TO FINANCIAL STATEMENTS - Continued
4. Changes in Partners' Equity
<TABLE>
A summary of changes in partners' equity (deficit) for the six months ended
June 30, 1994 is as follows:
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
Balance at
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993 $5,716,673 $(277,053) $(216,817) $5,222,803
Net loss (212,558) - (2,147) (214,705)
Balance at
June 30, 1994 $5,504,115 $(277,053) $(218,964) $5,008,098
</TABLE>
-6-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its
needs is dependent primarily upon the successful operations of its
real estate investments. Such ability is also dependent upon the
future availability of bank borrowings and the future refinancing
and sale of the Partnership's remaining real estate investments.
These sources of liquidity will be used by the Partnership for
payment of expenses related to real estate operations, capital
expenditures, debt service and expenses. Cash Flow, if any, as
calculated under Section 8.2(a) of the partnership agreement, will
then be available for distribution to the Partners. The
Partnership's status has improved over the past years. This
improvement was due to the sale of Westbrook/Willow Cove in 1993,
thus favorably impacting future cash flows. In addition, the
Partnership has taken advantage of the low interest rates by
refinancing Windsor Apartments in April 1994. Also, the
refinancing of Nora Corners is currently being finalized, with a
tentative close date in August 1994. Due to these events the
General Partners have determined that there is sufficient
Distributable Cash Flow in 1994 to reinstate distributions. These
distributions are commencing in August 1994 and thereafter are to
be paid semiannually.
On April 13, 1994, the Partnership successfully completed the
refinancing of Windsor Apartments mortgage note payable. The new
$5,300,000 note requires decreased debt service payments due to a
lower interest rate of 9.25% per annum from the previous rate of
10.3% per annum. The reduced mortgage payments will provide
additional liquidity to the Partnership that may be used to fund
capital improvements at its properties or for distributions.
The mortgage note at Nora Corners Shopping Center matured on June
1, 1994. The Partnership is finalizing the terms of a new note,
with the same lender, for approximately $4,250,000, at an interest
rate of 9%. The refinancing has a tentative close date of August
23, 1994.
Cash Flow
Shown below, as required by the Partnership Agreement, is the
calculation of Cash Flow for the six months ended June 30, 1994:
Rounded to $1,000
Net loss for tax purposes $(254,000)
Items not requiring (requiring) the use of
operating funds:
Tax basis depreciation and amortization 701,000
Principal payments on mortgage notes payable (75,000)
Capital improvement expenditures (65,000)
Replacement reserves for capital improvement
expenditures (2,000)
Working capital reserves (169,000)
Cash Flow $ 136,000
Continued
-7-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
Operations
The following discussion relates to the operations of the
Partnership and its properties (Courtyards Village, Nora Corners
and Windsor Apartments) for the three and six months ended June 30,
1994 and 1993. The sale of Westbrook Place/Willow Cove Apartments
("Westbrook"), in July 1993, significantly impacts the
comparability of the Partnership's operations between the three and
six month periods.
During the first six months of 1994, as compared to 1993, the
Partnership's rental revenues (net of Westbrook's rental revenues)
increased by $69,000. This increase was primarily due to rental
increases at Courtyards and Windsor as well as occupancy increases
at Windsor. Property values increased at Courtyards and Windsor as
a result of interior and exterior painting improvements and
carpentry renovations, started in 1993 and completed in the first
quarter of 1994. Landscaping and parking lot upgrades were also
implemented at Courtyards in 1993. These improvements allowed the
Partnership to obtain the rental increases at both properties.
Occupancy at Windsor increased due to the stabilization of the
Dallas economy, with home purchasing levelling off. As a result,
all rental concessions at Windsor were eliminated in the first
quarter of 1994. The Partnership's commercial property, Nora
Corners, signed a new tenant, Food King, a Chinese restaurant, in
the first quarter of 1994.
For the three and six months ended June 30, 1994, as compared to
the same periods in 1993, property expenses (excluding Westbrook)
have remained relatively stable.
Overall, year to date, operations at all of the Partnerships
properties have improved, as compared to the first six months of
1993. The General Partners believe that this improvement will
continue into the second half of 1994.
-8-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
(a) Exhibits
Windsor Apartments
(10.1) Promissory Note dated April 13, 1994 by and
between Windsor Partners Limited Partnership
and Sun Life Insurance Company of America.
(10.2) Deed of Trust, Security Agreement, Fixture
Filing, Financing Statement and Assignment of
Leases and Rents dated April 13, 1994 from the
Grantor, Windsor Partners Limited Partnership,
to the Trustee, Brian C. Ridger.
(b) Reports on Form 8-K
Response: None
-9-<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Krupp Realty Limited Partnership-VII
(Registrant)
BY:/s/Marianne Pritchard
Marianne Pritchard
Treasurer and Chief Accounting
Officer of The Krupp Corporation,
a General Partner.
DATE: August 1, 1994
-10-
PROMISSORY NOTE
U.S. $5,300,000.00
April 13, 1994
FOR VALUE RECEIVED, and at the times hereinafter specified,
WINDSOR PARTNERS LIMITED PARTNERSHIP, a Texas limited partnership ("Maker"),
whose address is c/o The Berkshire Group, Harbor Plaza, 470 Atlantic Avenue,
Boston, Massachusetts 02210, hereby promises to pay to the order of SUN LIFE
INSURANCE COMPANY OF AMERICA, a Maryland corporation (hereinafter referred to,
together with each subsequent holder hereof, as "Holder"), at l SunAmerica
Center, Century City, Los Angeles, California 90067-6022, or at such other
address as may be designated from time to time hereafter by any Holder, the
principal sum of FIVE MILLION THREE HUNDRED THOUSAND AND NO/lOOTHS DOLLARS
($5,300,000.00), together with interest on the principal balance outstanding
from time to time, as hereinafter provided, in lawful money of the
United States of America.
The balance of principal outstanding from time to time under this
promissory note (this "Note") shall bear interest at the rate of nine and
one-quarter percent (9.25%) per annum, based on a 360-day year. Interest
only shall be payable in advance on the date hereof for the period from and
including the date hereof through and including April 30, 1994. Commencing on
June 1, 1994, and on the first day of each month thereafter through and
including April 1, 2001, combined payments of principal and interest shall be
payable, in arrears, in the amount of $43,601.80 each (such amount
representing an amount sufficient to fully amortize the amount of this Note
over a thirty-year period). The entire outstanding principal balance,
together with all accrued and unpaid interest and all other sums due
hereunder, shall be due and payable in full on May 1, 2001.
During the first forty-two (42) months after the date of this Note,
Maker shall have no right to prepay all or any part of this Note. At any time
after the date forty-two (42) months after the date of this Note, Maker shall
have the right to prepay the full principal amount of this Note and all
accrued but unpaid interest hereon as of the date of prepayment, provided
that (a) Maker gives not less than thirty (30) days' prior written notice to
Holder of Maker's election to prepay this Note, and (b) Maker pays a
prepayment premium to Holder equal to the greater of (i) one percent (1%) of
the outstanding principal amount of this Note multiplied by the quotient of
the number of full months remaining to maturity of this Note divided by the
number of full months comprising the term of this Note or (ii) the Present
Value of this Note (as defined below), less the amount of principal being
prepaid, calculated as of the prepayment date. Holder shall notify Maker of
the amount and basis of determination of the prepayment premium. Holder shall
not be obligated to accept any prepayment of the principal balance of this
Note unless such prepayment is accompanied by the applicable prepayment
premium and all accrued interest and other sums due under this Note. In no
event shall Maker be permitted to make any partial prepayments of this Note.
If Holder accelerates this Note for any reason, then in addition to Maker's
obligation to pay the then outstanding principal balance of this Note and all
accrued but unpaid interest thereon, Maker shall pay an additional amount
equal to the prepayment premium that would be due to Holder if Maker were
voluntarily prepaying this Note at the time that such acceleration occurred,
or if under the terms hereof no voluntary prepayment would be permissible on
the date of such acceleration, Maker shall pay a prepayment premium calculated
as set forth in the Deed of Trust (as hereinafter defined). Notwithstanding
the foregoing to the contrary, (A) in the event Holder accelerates this Note
pursuant to Section 5.4 of the Deed of Trust, Holder may, at its option, waive
payment of any prepayment premium in connection therewith; (B) Maker shall
have the right to prepay (1) the full principal amount of this Note and all
accrued but unpaid interest hereon as of the date of prepayment without
payment of a prepayment premium if such prepayment is made voluntarily
(and not as a result of acceleration) within the last six (6) months of the
term of this Note, or (2) a portion of the principal balance of this Note
under the terms of Section 5.4(b) of the Deed of Trust subject to the payment
of the prepayment premium described therein; and (C) no prepayment premium
shall be due with respect to a prepayment of this Note under Section 4.5 or
4.8 of the Deed of Trust.
The "Present Value of this Note" with respect to any prepayment of
this Note, as of any date, shall be determined by discounting all scheduled
payments of principal and interest remaining to maturity of this Note,
attributed to the amount being prepaid, at the Discount Rate. If prepayment
occurs on a date other than a regularly scheduled payment date, the actual
number of days remaining from the prepayment date to the next regularly
scheduled payment date will be used to discount within such period.
The "Discount Rate" is the rate which, when compounded monthly, is
equivalent to the Treasury Rate, when compounded semiannually.
The "Treasury Rate" is the semi-annual yield on the Treasury
Constant Maturity Series with maturity equal to the remaining weighted average
life of this Note, for the week prior to the prepayment date, as reported in
Federal Reserve Statistical Release H.15 - Selected Interest Rates,
conclusively determined by Holder on the prepayment date. The rate will be
determined by linear interpolation between the yields reported in Release
H.15, if necessary. In the event Release H.15 is no longer published, Holder
shall select a comparable publication to determine the Treasury Rate.
Holder shall not be obligated actually to reinvest the amount prepaid
in any treasury obligations as a condition precedent to receiving any
prepayment premium.
Whenever any payment to be made under this Note shall be
stated to be due on a Saturday, Sunday or public holiday or the equivalent for
banks generally under the laws of the State of Texas (any other day being a
"Business Day"), such payment may be made on the next succeeding Business Day.
The entire balance of principal, interest, and other sums due upon
the maturity hereof, by acceleration or otherwise, shall bear interest from
the date due until paid at the rate of eighteen percent (18%) per annum (the
"Default Rate"); provided, however, that (i) notwithstanding any other
provision of this Note to the contrary, interest at the Default Rate shall be
based on the actual number of days in the then-current calendar year (whether
365 or 366); (ii) neither the Default Rate nor any other interest rate under
this Note shall exceed the maximum non-usurious interest rate permitted by
applicable state or Federal law; and (iii) the foregoing provision
concerning interest at the Default Rate shall be subject to the Usury Savings
Clause, hereinafter set forth.
If any payment under this Note is not made within five (5) days of
the date when due, interest shall accrue at the Default Rate from the date
five (5) days after the date such payment was due until payment is actually
made.
All payments hereunder shall be applied first to the payment of
prepayment premiums, if any, then to the repayment of any sums advanced by
Holder for the payment of any insurance premiums, taxes, assessments, or other
charges against the property securing this Note (together with interest
thereon at the Default Rate from the date of advance until repaid), then to
the payment of accrued and unpaid interest, and then to the reduction
of principal.
Payments under this Note shall be payable in immediately available
funds without setoff, counterclaim or deduction of any kind, and shall be made
by electronic funds transfer from a bank account established and maintained by
Maker for such purpose.
This Note is secured by a Deed of Trust, Security Agreement,
Fixture Filing, Financing Statement and Assignment of Leases and Rents of even
date herewith granted by Maker for the benefit of the named Holder hereof (the
"Deed of Trust"), encumbering certain property known as Windsor Apartments,
2811 North Shiloh Road, Garland, Texas, as more particularly described in such
Deed of Trust (the "Property"). Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Deed of Trust.
Any failure to pay any sum hereunder when due or failure to perform
any covenant or agreement herein contained within the applicable grace period
established by the Deed of Trust, if any, shall constitute an "Event of
Default" hereunder and under the Deed of Trust and under each other document
securing or executed in connection with this Note (collectively, the "Loan
Documents") and any default (after the expiration of any applicable grace or
cure periods) or Event of Default under any of the Loan Documents shall
constitute an Event of Default hereunder and under each other Loan Document.
Upon the occurrence of any such Event of Default, the entire balance of
principal, accrued interest, and other sums owing hereunder shall, at the
option of Holder, become at once due and payable without notice or demand.
Maker hereby certifies and declares that all acts, conditions and
things required to be done and performed and to have happened precedent to the
creation and issuance of this Note, and to constitute this Note the legal,
valid and binding obligation of Maker, enforceable in accordance with the
terms hereof, have been done and performed and happened in due and strict
compliance with all applicable laws.
Maker and all parties now or hereafter liable for the payment hereof,
primarily or secondarily, directly or indirectly, and whether as endorser,
guarantor, surety, or otherwise, hereby severally (a) waive presentment,
demand, protest, notice of protest and/or dishonor, and all other demands or
notices of any sort whatever with respect to this Note, (b) consent to
impairment or release of collateral, extensions of time for payment,
and acceptance of partial payments before, at, or after maturity, (c) waive
any right to require Holder to proceed against any security for this Note
before proceeding hereunder, (d) waive diligence in the collection of this
Note or in filing suit on this Note, and (e) agree to pay all costs and
expenses, including reasonable attorneys' fees, which may be incurred in the
collection of this Note or any part thereof or in preserving, securing
possession of, and realizing upon any security for this Note.
The provisions of this Note and of all agreements between Maker and
Holder are, whether now existing or hereafter made, hereby expressly limited
so that in no contingency or event whatever, whether by reason of
acceleration of the maturity hereof, prepayment, demand for payment or
otherwise, shall the amount paid, or agreed to be paid, to Holder for the
use, forbearance, or detention of the principal hereof or interest hereon,
which remains unpaid from time to time, exceed the maximum amount permissible
under applicable law, it particularly being the intention of the parties
hereto to conform strictly to the Texas and Federal law, whichever is
applicable. If from any circumstance whatever, the performance or fulfillment
of any provision hereof or of any other agreement between Maker and Holder
shall, at the time performance or fulfillment of such provision is due,
involve or purport to require any payment in excess of the limits
prescribed by applicable law, then the obligation to be performed or
fulfilled is hereby reduced to the limit of such validity, and if from any
circumstance whatever Holder should ever receive as interest an amount which
would exceed the highest lawful rate, the amount which would be excessive
interest shall be applied to the reduction of the principal balance owing
hereunder (or, at Holder's option, be paid over to Maker) and shall not be
counted as interest. To the
extent permitted by applicable law, determination of the legal maximum amount
of interest shall at all times be made by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term
of this Note, all interest at any time contracted for, charged, or received
from Maker in connection with this Note and all other agreements between Maker
and Holder, so that the actual rate of interest on account of the indebtedness
represented by this Note is uniform throughout the term hereof. This paragraph
shall be referred to herein as the "Usury Savings Clause."
Maker warrants and represents to Holder that the loan evidenced by
this Note is for business, commercial, investment, or other similar purpose
and not primarily for personal, family, household, or agricultural use, as
such terms are used in Chapter One of the Texas Credit Code.
Except as expressly hereinafter set forth, the recourse of Holder
with respect to the obligations evidenced by this Note shall be solely to
the Property, Chattels, and Intangible Personalty described in the
Deed of Trust. Notwithstanding anything to the contrary contained in this
Note or in any Loan Document, nothing shall be deemed in any way to impair,
limit or prejudice the rights of Holder (a) in foreclosure proceedings or in
any ancillary proceedings brought to facilitate Holder's foreclosure on
the Property or any portion thereof; (b) to recover from Maker damages or
costs (including without limitation reasonable attorneys' fees) incurred by
Holder as a result of waste of the Property or Chattels by Maker; (c) to
recover from Maker any condemnation or insurance proceeds attributable to the
Property which were not paid to Holder or used to restore the Property in
accordance with the terms of the Deed of Trust or as otherwise agreed in
writing; (d) to recover from Maker any rents, profits, security deposits,
advances, rebates, prepaid rents or other similar sums attributable to the
Property collected by or for Maker following an Event of Default under any
Loan Document and not properly applied to the reasonable fixed and operating
expenses of the Property, including payments of this Note; (e) to pursue the
personal liability of Maker under the provisions of Section 5.11 or 5.12 of
the Deed of Trust, including any indemnification provisions under such
Section; (f) to exercise any specific rights or remedies afforded Holder under
any other provisions of the Loan Documents or by law or in equity or to
recover under any guarantee given in connection with this Note; provided,
however, that any personal liability of Maker or any general partner of Maker
shall be limited as otherwise set forth in this Note and Section 9.4 of the
Deed of Trust; (g) to recover from Maker the amount of any accrued taxes,
assessments, and/or utility charges affecting the Property (whether or not the
same have been billed) that are either unpaid by Maker or paid by Holder under
the Deed of Trust, and to collect from Maker any sums expended by Holder in
fulfilling the obligations of Maker, as lessor, under any leases
affecting the Property; provided, however, that with respect to Maker's
liability for accrued taxes, Maker shall be credited with any amounts escrowed
by Maker for payment of such taxes under Section 4.4 of the Deed of Trust; and
(h) to pursue any personal liability of Maker under the Environmental
Indemnity Agreement executed by Maker in favor of Holder of even date
herewith. The agreement contained in this paragraph to limit the personal
liability of Maker shall become null and void and be of no further force and
effect in the event (i) that the Property or any part thereof or any interest
therein, or any interest in Maker, shall be further encumbered by a
voluntary lien securing any obligation upon which Maker or any General Partner
(as such term is defined in the Deed of Trust) shall be personally liable for
repayment, whether as obligor or guarantor; provided, however, that with
respect to mechanic's or materialman's liens, this subsection (i) shall not
become operative until the expiration of thirty (30) days after that date
Maker receives written notice of such lien, during which thirty (30) days
Maker may attempt to cause any such lien to be released of record or, in lieu
thereof, furnish Holder with a bond in form and with sureties satisfactory to
Holder indemnifying Holder against any loss, cost, damages, or expenses
arising in connection with such lien; (ii) of any breach or violation of
Section 5.4, 5.5 or 5.7 of the Deed of Trust; (iii) of any fraud or material
misrepresentation by Maker in connection with the Property, the Loan Documents
or the application made by Maker for the loan evidenced by this Note; or (iv)
Maker acts outside the ordinary course of business with respect to the Leases
and such activity by Maker causes a loss to Holder; provided, however, if
Maker operates the Property as any other prudent operator of an apartment
complex in Garland, Texas would operate its property, no recourse liability to
Maker shall arise under this subsection (iv). Notwithstanding the foregoing
to the contrary, (A) in no event shall any General Partner have any personal
liability for payment of the Additional Premium (as defined in the Deed of
Trust), (B) upon the acceptance in writing by Holder of (1) a cure by Maker
of a breach or violation of Section 5.4, 5.5 or 5.7 of the Deed of Trust, or
(2) the removal of any encumbrance described in Section 9.4(i) of the Deed of
Trust, which acceptance may be granted or withheld in Holder's sole discretion
exercised in good faith, the personal liability of Maker for the obligations
evidenced by this Note incurred as a result of any such breach or violation of
Section 5.4, 5.5 or 5.7 or any such encumbrance described in Section 9.4(i)
shall terminate, and (C) in no event shall George Krupp or Douglas Krupp be
personally liable for the obligations evidenced by this Note.
If Article 1.04 of the Texas Credit Code is applicable to this Note,
and applicable Federal law does not permit a higher interest rate, the
interest rate ceiling applicable to the loan evidenced by this Note shall be
the "indicated rate ceiling", as defined in Article 1.04 of the Texas Credit
Code.
If any provision hereof or of any other document securing or related
to the indebtedness evidenced hereby is, for any reason and to any extent,
invalid or unenforceable, then neither the remainder of the document in which
such provision is contained, nor the application of the provision to other
persons, entities, or
circumstances, nor any other document referred to herein, shall be affected
thereby, but instead shall be enforceable to the maximum extent permitted by
law.
Each provision of this Note shall be and remain in full force and
effect notwithstanding any negotiation or transfer hereof and any interest
herein to any other Holder or participant.
Regardless of the place of its execution, this Note shall be
construed and enforced in accordance with the laws of the State of Texas.
MAKER AND HOLDER KNOWINGLY, IRREVOCABLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, THE DEED OF TRUST,
OR ANY OTHER LOAN DOCUMENTS, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS NOTE, THE DEED OF TRUST, OR ANY OTHER LOAN DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR MAKER AND HOLDER TO ENTER INTO THE LOAN TRANSACTION EVIDENCED
BY THIS NOTE.
EXCEPT AS EXPRESSLY HEREIN PROVIDED, MAKER HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THIS NOTE, IN
WHOLE OR IN PART, WITHOUT PREPAYMENT CHARGE, WHETHER VOLUNTARILY OR UPON
ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND AGREES THAT, IF FOR ANY
REASON A PREPAYMENT OF ALL OR ANY PART OF THIS NOTE IS MADE, WHETHER
VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY
HOLDER FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY
PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF
THE PROPERTY OR ANY PART THEREOF SECURING THIS NOTE, THEN MAKER SHALL BE
OBLIGATED TO PAY (EXCEPT AS OTHERWISE PROVIDED IN THIS NOTE), CONCURRENTLY
WITH SUCH PREPAYMENT, EITHER (i) THE PREPAYMENT PREMIUM PROVIDED FOR IN THIS
NOTE, OR (ii) IN THE EVENT OF PREPAYMENT FOLLOWING ACCELERATION OF THE
MATURITY DATE HEREOF WHEN THIS NOTE IS CLOSED TO PREPAYMENT, THE PREPAYMENT
PREMIUM PROVIDED IN SECTION 1.23 OF THE DEED OF TRUST. MAKER HEREBY DECLARES
THAT HOLDER'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE
INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE
CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY MAKER, FOR THIS WAIVER AND
AGREEMENT.
IN WITNESS WHEREOF, Maker has duly executed this Note as of
the date first above written.
WINDSOR PARTNERS LIMITED PARTNERSHIP, a Texas limited partnership
By: ST Windsor Corporation, a Texas corporation, its General Partner //,
Name:
Title:
STATE OF TEXAS
COUNTY OF DALLAS
Recording requested by:
And when recorded mail to:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 Seventeenth Street Suite 1600
Denver, Colorado 80202
Attention: Henry I. Lowe, Esq.
DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING,
FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND RENTS
THIS DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING,
FINANCING STATEMENT AND ASSIGNMENT OF Leases AND RENTS (this "Deed
of Trust") is given as of April 13, 1994, by the Grantor named
below to the Trustee named below, for the use and benefit of the
Beneficiary named below.
ARTICLE I
PARTIES, PROPERTY, AND DEFINITIONS
The following terms and references shall have the
meanings indicated:
1.1 Beneficiary: Sun Life Insurance Company of America,
a Maryland corporation (Taxpayer I.D. No. 52-0502540), whose legal
address is 1 SunAmerica Center, Century City, Los Angeles,
California 90067-6022, together with any future holder of the Note.
1.2 Chattels: All goods, fixtures, inventory,
equipment, building and other materials, supplies, and other
tangible personal property of every nature now owned or hereafter
acquired by Grantor and used, intended for use, or reasonably
required in the construction, development, or operation of the
Property, together with all accessions thereto, replacements and
substitutions therefor, and proceeds thereof.
1.3 Default: Any matter which, with the giving of
notice, passage of time, or both, would constitute an Event of
Default.
1.4 Environmental Claims: Any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation,
investigations or proceedings relating in any way to any
Environmental Law (for purposes of this definition, "claims") or
any permit issued under any such Environmental Law, including
without limitation (a) any and all claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all claims by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to
health, safety or the environment.
1.5 Environmental Indemnity Agreement:
environmental Indemnity Agreement of even date herewith made by
Grantor and Guarantor for the benefit of Beneficiary.
1.6 Environmental Law: Any federal, state or local
statute, law, rule, regulation, ordinance, code, policy or rule of
common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Substances, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. 9601, et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. 1801, et seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C.
6901, et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. 1251, et seq.; the Toxic Substances Control
Act, 15 U.S.C. 2601, et seq.; the Clean Air Act, 42 U.S.C.
7401, et seq.; and the Safe Drinking Water Act, 42 U.S.C.
300(f), et seq.
1.7 ERlSA: The Employee Retirement Income Security Act
of 1974, as amended, together with all rules and regulations issued
thereunder.
1.8 Event of Default: As defined in Article VI.
1.9 General Partner: ST Windsor Corporation, a Texas
corporation, and any other or successor general partner of Grantor.
1.10 Grantor: Windsor Partners Limited Partnership, a
Texas limited partnership, whose legal address is c/o The
Berkshire Group, Harbor Plaza, 470 Atlantic Avenue, Boston,
Massachusetts 02210, together with any future owner of the Property
or any part thereof or interest therein.
1.11 Guarantor: Krupp Realty Limited Partnership-VII, a
Massachusetts limited partnership.
1.12 Guaranty Agreement: The Guaranty Agreement of even
date herewith made by the Guarantor for the benefit of Beneficiary.
1.13 Hazardous Substances: (a) Any chemicals, materials or
substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials",
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "contaminants" or pollutants," or
words of similar import, under any applicable Environmental Law;
and (b) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental
authority.
1.14 Intangible Personalty: The right to use all
trademarks and trade names and symbols or logos used in connection
therewith, or any modifications or variations thereof, in
connection with the operation of the improvements existing or to be
constructed on the Property, together with all accounts, monies in
the possession of Beneficiary (including, without limitation,
proceeds from insurance, retainages and deposits for taxes and
insurance), Permits, contract rights (including, without
limitation, rights to receive insurance proceeds) and general
intangibles (whether now owned or hereafter acquired, and including
proceeds thereof) relating to or arising from Grantor's ownership,
use, operation, leasing, or sale of all or any part of the
Property, and any right which Grantor may have or acquire to
transfer any development rights from the Property to other real
property, and any development rights which may be so transferred.
1.15 Lease Certificate: The Certificate of even date
herewith made by Grantor to Beneficiary concerning Leases of the
Property.
1.16 Leases: Any and all leases, subleases and other
agreements under the terms of which any person other than Grantor
has or acquires any right to occupy or use the Property, or any
part thereof.
1.17 Loan Documents: The Note, the Environmental
Indemnity Agreement, the Guaranty Agreement, the Lease Certificate,
all of the deeds of trust, mortgages and other instruments and
documents securing the Note, including this Deed of Trust, and each
other document executed or delivered in connection with the
transaction pursuant to which the Note has been executed and
delivered. The term "Loan Documents" also includes all amendments,
modifications, extensions, renewals, and replacements of each
document referred to above.
1.18 Note: Grantor's promissory note of even date
herewith, payable to the order of Beneficiary in the principal face
amount of $5,300,000 the last payment under which is due on May 1,
2001, unless such due date is accelerated, together with all
renewals, extensions and modifications of such promissory note. All
terms and provisions of the Note are incorporated by this reference
in this Deed of Trust.
1.19 Permits: All permits, licenses, certificates and
authorizations necessary for the beneficial development, ownership,
use, occupancy, operation and maintenance of the Property.
1.20 Permitted Exceptions: The matters set forth in
Exhibit B attached hereto.
1.21 Property: The tract or tracts of land described in
Exhibit A attached hereto, together with the following:
(a) All buildings, structures, and improvements now or
hereafter located on such tract or tracts, as well as all
rights-of-way, easements, and other appurtenances thereto;
(b) All of Grantor's right, title and interest in any land
lying between the boundaries of such tract or tracts and the center
line of any adjacent street, road, avenue, or alley, whether opened
or proposed;
(c) All of the rents, income, receipts, revenues, issues and
profits of and from such tract or tracts and improvements;
(d) All of Grantor's right, title and interest to all (i)
water and water rights (whether decreed or undecreed, tributary,
nontributary or not nontributary, surface or underground, or
appropriated or unappropriated); (ii) ditches and ditch
rights; (iii) spring and spring rights; (iv) reservoir and
reservoir rights; and (v) shares of stock in water, ditch and canal
companies and all other evidence of such rights, which are now
owned or hereafter acquired by Grantor and which are appurtenant to
or which have been used in connection with such tract or
tracts or improvements;
(e) All minerals, crops, timber, trees, shrubs, flowers,
and landscaping features now or hereafter located on, under or
above such tract or tracts;
(f) All machinery, apparatus, equipment, fittings, fixtures
(whether actually or constructively attached, and including all
trade, domestic, and ornamental fixtures) now or hereafter
located in, upon, or under such tract or tracts or improvements and
used or usable in connection with any present or future
operation thereof (excluding any of such items owned by tenants
under the Leases or Manager (as hereinafter defined)), including
but not limited to all heating, airconditioning, freezing,
lighting, laundry, incinerating and power equipment; engines;
pipes; pumps; tanks; motors; conduits; switchboards; plumbing,
lifting, cleaning, fire prevention, fire extinguishing,
refrigerating, ventilating, cooking, and communications apparatus;
boilers, water heaters, ranges, furnaces, and burners; appliances;
vacuum cleaning systems; elevators; escalators; shades; awnings;
screens; storm doors and windows; stoves; refrigerators;
attached cabinets; partitions; ducts and compressors; rugs and
carpets; draperies; and all additions thereto and replacements
therefor;
(g) All development rights associated with such tract or
tracts, whether previously or subsequently transferred to such
tract or tracts from other real property or now or hereafter
susceptible of transfer from such tract or tracts to other real
property;
(h) All awards and payments, including interest thereon,
resulting from the exercise of any right of eminent domain or any
other public or private taking of, injury to, or decrease in the
value of, any of such property; and
(i) All of Grantor's right, title and interest to all other
and greater rights and interests of every nature in such tract or
tracts and in the possession or use thereof and income therefrom,
whether now owned or subsequently acquired by Grantor.
1.22 Release: Disposing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping, emptying,
seeping, placing and the like, into or upon any land or water or
air, or otherwise entering into the environment.
1.23 Secured Obligations: All present and future
obligations of Grantor to Beneficiary evidenced by or contained in
the Note and all other Loan Documents, whether stated in the form
of promises, covenants, representations, warranties, conditions, or
prohibitions or in any other form. If the maturity of the Note is
accelerated, whether as the result of the occurrence of an Event of
Default or otherwise, the Secured Obligations shall include an
amount equal to any prepayment fee or premium which would be
payable under the terms of the Note, as if the Note was prepaid in
full on the date of such acceleration. If under the terms of the
Note no voluntary prepayment would be permissible on the date of
such acceleration, then the prepayment fee or premium to be
included in the Secured Obligations shall be equal to one hundred
ten percent (110%) of the highest prepayment fee or premium set
forth in the Note, calculated as of the date of such
acceleration; provided however, that if such amount is ever
construed to be interest, it is intended that such amount, when
considered together with all other amounts constituting interest,
shall never exceed the maximum amount as set forth in the "Usury
Savings Clause" (as defined in the Note). The portion of the
prepayment fee or premium calculated in accordance with the
preceding sentence, to the extent that such fee or premium exceeds
one hundred percent (100%) of the highest prepayment fee or
premium set forth in the Note, shall hereinafter be referred to
as the "Additional Premium."
1.24 Trustee: Brian C. Rider, whose legal address is
Brown McCarroll & Oaks Hartline, 1400 Franklin Plaza, 111 Congress
Avenue, Austin, Texas 78701.
ARTICLE II
GRANTING CLAUSE
2.1 Grant to Trustee. As Security for the Secured
Obligations, Grantor hereby grants, bargains, sells, and conveys
the Property to Trustee, in trust, with mortgage covenants and with
power of sale, for the use and benefit of Beneficiary, and subject
to all provisions hereof.
2.2 Security Interest to Beneficiary. As additional
security for the Secured Obligations, Grantor hereby grants to
Beneficiary a security interest in the Property, Chattels and
Intangible Personalty. To the extent any of the Property, Chattels
or Intangible Personalty may be or have been acquired with funds
advanced by Beneficiary under the Loan Documents, this security
interest is a purchase money security interest. This Deed of Trust
constitutes a security agreement under the Uniform Commercial Code
of the state in which the Property is located (the "Code") with
respect to any part of the Property, Chattels and Intangible
Personalty that may or might now or hereafter be or be deemed to be
personal property, fixtures or property other than real estate (all
collectively hereinafter called "Collateral"); all of the terms,
provisions, conditions and agreements contained in this Deed of
Trust pertain and apply to the Collateral as fully and to the same
extent as to any other property comprising the Property, and the
following provisions of this Section shall not limit the generality
or applicability of any other provisions of this Deed of Trust but
shall be in addition thereto:
(a) The Collateral shall be used by Grantor solely for
business purposes, and (excluding the Intangible Personalty)
shall be installed upon the real estate comprising part of the
Property for Grantor's own use or as the equipment and furnishings
furnished by Grantor, as landlord, to tenants of the Property;
(b) The Collateral (excluding the Intangible Personalty)
shall be kept at the real estate comprising a part of the
Property, and shall not be removed therefrom without the
consent of Beneficiary (being the Secured Party as that term is
used in the Code); and the Collateral (excluding the Intangible
Personalty) may be affixed to such real estate but shall not be
affixed to any other real estate;
(c) No financing statement covering any of the Collateral
or any proceeds thereof is on file in any public office; and
Grantor will, at Grantor's cost and expense, upon demand, furnish
to Beneficiary such further information and will execute and
deliver to Beneficiary such financing statements and other
documents in form satisfactory to Beneficiary and will do all such
acts and things as Beneficiary may at any time or from time to time
reasonably request or as may be necessary or appropriate to
establish and maintain a perfected first-priority security
interest in the Collateral as security for the Secured Obligations,
subject to no adverse liens or encumbrances; and Grantor will pay
the cost of filing the same or filing or recording such financing
statements or other documents and this instrument in all
public offices wherever filing or recording is deemed by
Beneficiary to be necessary or desirable;
(d) The terms and provisions contained in this Section and in
Section 7.6 of this Deed of Trust shall, unless the context
otherwise requires, have the meanings and be construed as provided
in the Code; and
(e) This Deed of Trust constitutes a financing statement under
the Code with respect to the Collateral. As such, this Deed of
Trust covers all items of the Collateral that are or are to become
fixtures. The filing of this Deed of Trust in the real estate
records of the county where the Property is located shall operate
as a fixture filing in accordance with the Code.
Information concerning the security interests created hereby may be
obtained from Grantor or Beneficiary at the addresses set forth in
Article I of this Deed of Trust. Grantor is the "Debtor" and
Beneficiary is the "Secured Party" (as those terms are defined and
used in the Code) insofar as this Deed of Trust constitutes a
financing statement.
ARTICLE III
GRANTOR'S REPRESENTATIONS AND WARRANTIES
3.1 Warranty of Title. Grantor represents and warrants
to Beneficiary that:
(a) Grantor has good and indefeasible title to the
Property, and such fee simple title is free and clear of all liens,
encumbrances, security interests and other claims whatsoever,
subject only to the Permitted Exceptions.
b) Grantor is the absolute owner of the Chattels and
the Intangible Personalty, free of any liens, encumbrances,
security interests, and other claims whatsoever, subject only to
the Permitted Exceptions.
(c) This Deed of Trust is a valid and enforceable
first lien and security interest in the Property, Chattels and
Intangible Personalty, subject to the Permitted Exceptions.
(d) Grantor, for Grantor and Grantor's successors
and assigns, hereby agrees to warrant and forever defend all of the
Property and property interest granted and conveyed in trust
pursuant to this Deed of Trust against every person whomsoever
lawfully claiming, or to claim, the same or any part thereof.
The representations, warranties and covenants contained in
this Section shall survive foreclosure of this Deed of Trust, and
shall inure to the benefit of and be enforceable by any person who
may acquire title to the Property, the Chattels, or the
Intangible Personalty pursuant to any such foreclosure.
3.2 Other Representations and Warranties. Grantor
represents and warrants to Beneficiary as follows:
(a) Grantor is a limited partnership, duly organized,
validly existing, and in good standing under Texas. The sole
general partner of Grantor is ST Windsor Corporation, a
corporation duly organized, validly existing and in good
standing under Texas law.
(b) The execution, delivery and performance by Grantor of the
Loan Documents will not contravene any contractual or other
restriction binding on or affecting Grantor, any General Partner,
or any Guarantor, including any certificate or agreement of limited
partnership or other organizational documents or agreements of
Grantor, and will not result in or require the creation of any
lien, security interest, other charge or encumbrance (other than
pursuant hereto) upon or with respect to any of Grantor's
properties.
(c) The execution, delivery and performance by Grantor of the
Loan Documents does not contravene any applicable law.
(d) No authorization, approval, consent or other action by,
and no notice to or filing with, any court, governmental authority
or regulatory body is required for the due execution, delivery and
performance by Grantor of any of the Loan Documents or the
effectiveness of any assignment of any of Grantor's rights and
interests of any kind to Beneficiary.
(e) This Deed of Trust is, and each other Loan Document
to which Grantor is a party will, when delivered hereunder, be
valid and binding obligations of Grantor enforceable against
Grantor in accordance with their respective terms, except as
limited by equitable principles and bankruptcy, insolvency and
similar laws affecting creditors' rights.
(f) No part of the Property, Chattels, or Intangible
Personalty is in the hands of a receiver, no application for a
receiver is pending with respect to any portion of the Property,
Chattels, or Intangible Personalty and no part of the Property,
Chattels, or Intangible Personalty is subject to any foreclosure or
similar proceeding.
(g) Except as otherwise disclosed in writing on or before the
date hereof by Grantor to Beneficiary, neither Grantor, any General
Partner, nor any Guarantor has made an assignment for the benefit
of creditors, nor has Grantor, any General Partner or any
Guarantor filed, or had filed against it, any petition in
bankruptcy.
(h) Except as otherwise disclosed in writing on or before the
date hereof by Grantor to Beneficiary, there is no pending or, to
the best of Grantor's knowledge, threatened, litigation,
action, proceeding or investigation, including, without
limitation, any condemnation proceeding, against Grantor, any
General Partner, any Guarantor, or the Property before any court,
governmental or quasi-governmental, arbitrator or other authority.
(i) Grantor is a "non-foreign person" within the meaning of
Section 1445 of the United States Internal Revenue Code of 1986, as
amended, and the regulations issued thereunder.
(j) Access to and egress from the Property are available and
provided by public streets, and Grantor has no knowledge of any
federal, state, county, municipal or other governmental plans to
change the highway or road system in the vicinity of the Property
which would restrict or otherwise adversely affect public access to
the Property.
(k) Adequate utilities services exist for the full and
beneficial development, ownership, use, occupancy, operation and
maintenance of the Property, and Grantor is not in default of any
obligation to any utility service provider.
(l) The Property is located in a zoning district
designated MF-18 (Multi-Family 18) (the "District") by the City of
Garland, Texas. Such designation permits the development, use, and
operation of the Property as it is currently operated as a matter
of right and not as a non-conforming use. With respect to the City
of Garland zoning requirements for density, parking, setback and
unit area requirements for certain of the 1-bedroom units, the
Property does not currently comply; however, the Property is
classified by the City of Garland as "legally non-conforming".
The result of such classification is that if less than
60% of a nonconforming structure (as defined in Section 35-511 of
the City of Garland, Texas Zoning Ordinance (the
"Ordinance")) is damaged or destroyed, such structure may be
rebuilt so long as there is no increase in the nonconformity with
the provisions of the Ordinance that existed at the time of the
damage or destruction. In addition, the Property complies
with all deed restrictions and other restrictive covenants
affecting the Property. Grantor has not been notified by the City
of Garland, Texas, or any other governmental entity with
jurisdiction over the Property that the Property is not in
compliance with any other requirements, conditions, regulations,
ordinances, or other laws applicable to the Property.
(m) There are no special or other assessments for public
improvements or otherwise now affecting the Property, nor
does Grantor know of any pending or threatened special
assessments affecting the Property or any contemplated improvements
affecting the Property that may result in special assessments.
There are no tax abatements or exceptions affecting the Property.
(n) Grantor, each General Partner, and each Guarantor
have filed all tax returns which are required to be filed by them,
and have paid all taxes as shown on such returns or on any
assessment received pertaining to the Property.
(o) Grantor has not received any notice from any governmental
body having jurisdiction over the Property as to any violation of
any applicable law, or any notice from any insurance company or
inspection or rating bureau setting forth any requirements as a
condition to the continuation of any insurance coverage on or with
respect to the Property or the continuation thereof at premium
rates existing at present which have not been remedied or
satisfied.
(p) Except as otherwise disclosed to Beneficiary in
writing on or before the date hereof, neither Grantor, any
General Partner, nor any Guarantor is in default, in any manner
which would give any third party the right to commence
foreclosure proceedings against the properties or assets of
Grantor, any General Partner, or any Guarantor or seek a
judgment in connection therewith, or which could materially
adversely affect the operations or condition (financial or
otherwise) of Grantor, any General Partner or any Guarantor,
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions set forth in any agreement
or instrument to which it is a party or by which it or any of its
properties, assets or revenues are bound.
(q) Except as set forth in the Lease Certificate, there are no
occupancy rights (written or oral), Leases or tenancies presently
affecting any part of the Property. The Lease Certificate
contains a true and correct description of all Leases presently
affecting the Property. No written or oral agreements or
understandings exist between Grantor and the tenants under the
Leases described in the Lease Certificate that grant such tenants
any rights greater than those described in the Lease
Certificate or that are in any way inconsistent with the rights
described in the Lease Certificate.
(r) There are no options to purchase, purchase contracts or
other similar agreements of any type (written or oral)
presently affecting any part of the Property.
(s) There exists no brokerage agreement with respect to
any part of the Property.
(t) Except as otherwise disclosed to Beneficiary in writing
prior to the date hereof, (i) there are no contracts presently
affecting the Property ("Contracts") in excess of one hundred
eighty (180) days or not terminable by Grantor on thirty
(30) days' notice; (ii) Grantor has heretofore delivered to
Beneficiary true and correct copies of each of the Contracts
together with all amendments thereto; (iii) Grantor is not in
default of any obligations under any of the Contracts; and (iv)
the Contracts represent the complete agreement between Grantor
and such other parties as to the services to be performed or
materials to be provided thereunder and the compensation to be paid
for such services or materials, as applicable, and except as
otherwise disclosed herein, such other parties possess no
unsatisfied claims against Grantor. No event has occurred
which, with the passing of time or the giving of notice, or both,
would constitute a default under any of the Contracts.
(u) None of the Permits has been suspended or revoked, and all
of the Permits are in full force and effect, are fully paid for,
and Grantor has made or will make application for renewals of any
of the Permits prior to the expiration thereof.
(v) All insurance policies held by Grantor relating to or
affecting the Property are in full force and effect and shall
remain in full force and effect until all Secured Obligations are
satisfied. Grantor has not received any notice of default or
notice terminating or threatening to terminate any such insurance
policies. Grantor has made or will make application for renewals of
any of the insurance policies prior to the expiration thereof.
(w) Grantor either is not subject to or currently complies
with ERISA. Neither the making of the loan evidenced by the Note
and secured by this Deed of Trust nor the exercise by Beneficiary
of any of its rights under the Loan Documents constitutes or will
constitute a non-exempt, prohibited transaction under ERISA.
3.3 Continuing Effect. Subject to the provisions of
Section 9.4 hereof, Grantor shall be liable to Beneficiary for any
damage suffered by Beneficiary by reason of the breach or
inaccuracy of any of the foregoing representations or warranties,
regardless of when such inaccuracy may be discovered by, or result
in harm to, Beneficiary. Grantor further covenants that it shall
cause the foregoing representations (other than the representations
set forth in Subsections 3.2(h), (m), (o), (q), (r), (s) and (t)),
as well as all other representations of Grantor to Beneficiary
relative to the Loan Documents, to be true and correct at all times
throughout the term of the Note and all such representations shall
survive termination of this Deed of Trust.
ARTICLE IV
GRANTOR'S AFFIRMATIVE COVENANTS
4.1 Payment of Note. Grantor will pay all principal,
interest, and other sums payable under the Note on the dates when
such payments are due, without notice or demand.
4.2 Performance of Other Obligations. Grantor will
promptly and strictly perform and comply with all other covenants,
conditions, and prohibitions required of Grantor by the terms of
the Loan Documents.
4.3 Other Encumbrances. Grantor will
promptly and strictly perform and comply with all covenants,
conditions, and prohibitions required of Grantor in connection with
any other encumbrance affecting the Property, the Chattels, or the
Intangible Personalty, or any part thereof, or any interest
therein, regardless of whether such other encumbrance is
superior or subordinate to the lien hereof.
4.4 Payment of Taxes.
(a) Property Taxes. Grantor will pay, before delinquency
and prior to the imposition of any late payment charge or penalty,
all taxes and assessments, general or special, which may be levied
or imposed at any time against Grantor's interest and estate
in the Property, the Chattels, or the Intangible Personalty. Upon
any request by Beneficiary, Grantor will deliver to Beneficiary an
official receipt for such payment or other reasonable evidence of
payment. At Beneficiary's option during any time for which escrow
deposits have not been made pursuant to Section 4.4(b) below,
Beneficiary may retain the services of a firm to monitor the
payment of all taxes and assessments relating to the Property, the
cost of which shall be borne by Grantor.
(b) Deposit for Taxes. On or before the date hereof, Grantor
shall deposit with Beneficiary an amount equal to l/12th of the
amount which Beneficiary estimates will be required to make the
next annual payment of taxes, assessments, and similar
governmental charges referred to in this Section, multiplied by the
number of whole or partial months that have elapsed since one month
prior to the last date on which a payment of taxes was due.
Thereafter, with each monthly payment under the Note, Grantor will
deposit with Beneficiary an amount equal to l/12th of the amount
which Beneficiary estimates will be required to make the next
annual payment of taxes, assessments, and similar governmental
charges referred to in this Section 4.4. The purpose of these
provisions is to provide Beneficiary with sufficient funds on hand
to pay all such taxes, assessments, and other governmental charges
thirty (30) days before the date on which they become past due. If
Beneficiary, in its sole discretion, determines that the funds
escrowed are, or will be insufficient, Grantor shall upon demand
pay such additional sums as Beneficiary shall determine necessary
and shall pay any increased monthly charges requested by
Beneficiary. Provided that no Event of Default exists hereunder,
Beneficiary will apply the amounts so deposited to the payment of
such taxes, assessments, and other charges when due, but in no
event will Beneficiary be liable for any interest on any amount so
deposited. The money so received shall be deposited in an
FDIC-insured account and may be commingled with Beneficiary's own
funds.
(c) Intangible Taxes. If by reason of any statutory
or constitutional amendment or judicial decision adopted or
rendered after the date hereof, any tax, assessment, or similar
charge is imposed against the Note, against Beneficiary, or against
any interest of Beneficiary in any real or personal property
encumbered hereby, Grantor will pay such tax, assessment, or other
charge before delinquency and will indemnify Beneficiary against
all loss, expense, or diminution of income in connection therewith.
In the event Grantor is unable to do so, either for economic
reasons or because the legal provisions or decisions creating such
tax, assessment or charge forbid Grantor from doing 80, then the
Note will, at Beneficiary's option, become due and payable in full
upon thirty (30) days' notice to Grantor.
(d) Right to Contest. Notwithstanding any other provision of
this Section 4.4, Grantor will not be deemed to be in Default
solely by reason of Grantor's failure to pay any tax, assessment or
similar governmental charge so long as, in Beneficiary's judgment,
each of the following conditions is satisfied:
(i) Grantor is engaged in and diligently pursuing in good
faith administrative or judicial proceedings appropriate to
contest the validity or amount of such tax, assessment, or charge;
and
(ii) Grantor's payment of such tax, assessment, or charge
would necessarily and materially prejudice Grantor's
prospects for success in such proceedings; and
(iii) Nonpayment of such tax, assessment, or charge will not
result in the loss or forfeiture of any property encumbered
hereby or any interest of Beneficiary therein; and
(iv) Grantor deposits with Beneficiary, as security for such
payment which may ultimately be required, a sum equal to the
amount of the disputed tax, assessment or charge plus the
interest, penalties, advertising charges, and other costs which
Beneficiary estimates are likely to become payable if Grantor's
contest is unsuccessful or such other security as may be
satisfactory to Beneficiary (less any amounts escrowed under
Section 4.4 hereof).
Provided that all of the foregoing conditions are satisfied,
Beneficiary shall not knowingly take any action that would
jeopardize Grantor's prospect of success in any proceeding to
contest the validity or amount of such tax, assessment, or charge.
If Beneficiary determines that any one or more of such conditions
is not satisfied or is no longer satisfied, Grantor will pay the
tax, assessment, or charge in question, together with any interest
and penalties thereon, within fifteen (15) days after Beneficiary
gives notice of such determination.
4.5 Maintenance of Insurance.
(a) Coverages Required. Grantor shall maintain or cause to be
maintained, with financially sound and reputable insurance
companies or associations, insurance which insures the Property
against (i) all risk of loss, damage, destruction, theft, or any
other casualty or risk, covering the Property including all of
Grantor's personal property located therein, without deduction for
depreciation, in an amount approved by Beneficiary, but in no event
less than the full replacement cost thereof, and builder's risk
insurance throughout the period of any construction of any
improvements on the Property, (ii) use and occupancy insurance
covering either rental income or business interruption with
coverage in an amount not less than twelve (12) months'
anticipated gross rental income, (iii) comprehensive
general liability insurance covering the Property and Grantor under
a blanket insurance policy, in an amount not less than $1,000,000
for bodily injury and/or property damage liability per occurrence
and $15,000,000 in the aggregate, or such higher amounts as
Beneficiary may reasonably require, and (iv) worker's
compensation insurance in accordance with the requirements of
applicable law, which policies of insurance maintained pursuant to
this Section 4.5 shall provide standard mortgagee endorsements
or clauses naming Beneficiary as mortgagee and as loss payee (with
respect to property insurance) or additional insured (with
respect to liability insurance). Each policy of insurance
required hereunder shall provide that it shall not be modified or
canceled without at least thirty (30) days' written notice to
Beneficiary. The original or a certified copy of each insurance
policy shall be delivered to Beneficiary, and such delivery
will constitute an assignment to Beneficiary, as further security
for the Secured Obligations, of all unearned premiums returnable
upon cancellation of any such policy. Grantor shall also maintain,
at the request of Beneficiary, such hazard insurance, in addition
to the insurance required above, as Beneficiary may reasonably
request and as shall be available, including but not limited to
flood, including surface waters, and earthquake, including
subsidence, all of such insurance to comply in all respects with
the requirements of this Section 4.5.
(b) Renewal Policies. Not less than fifteen (15) days prior
to the expiration date of each insurance policy required pursuant
to subsection 4.5(a) above, Grantor will deliver to
Beneficiary an appropriate renewal policy (or a certified copy
thereof) or an insurance certificate or binder evidencing a
commitment to issue such renewal policy in form acceptable to
Beneficiary, together with evidence satisfactory to
Beneficiary that the applicable premium has been prepaid.
(c) Deposit for Premiums. If a Default or Event of Default
shall have occurred hereunder and remains uncured, and
Beneficiary shall so request, Grantor shall immediately deposit
with Beneficiary an amount equal to 1/12th of the amount which
Beneficiary estimates will be required to make the next annual
payments of the premiums for the policies of insurance referred
to in this Section 4.5, multiplied by the number of whole and
partial months which have elapsed since the date one month prior to
the most recent policy anniversary date for each such policy.
Thereafter, with each monthly payment under the Note, Grantor will
deposit an amount equal to 1/12th of the amount which Beneficiary
estimates will be required to pay the next required annual premium
for each insurance policy referred to in this Section 4.5.
The purpose of these provisions is to provide Beneficiary with
sufficient funds on hand to pay all such premiums thirty (30) days
before the date on which they become past due. If Beneficiary, in
its sole discretion, determines that the funds escrowed are, or
will be, insufficient, Grantor shall upon demand pay such
additional sums as Beneficiary shall determine necessary and shall
pay any increased monthly charges requested by Beneficiary.
Beneficiary will apply the amounts so deposited to the payment of
such insurance premiums when due, but in no event will Beneficiary
be liable for any interest on any amounts so deposited, and the
money so received may be held and commingled with Beneficiary's own
funds.
(d) Application of Hazard Insurance Proceeds. Grantor
shall promptly notify Beneficiary of any damage or casualty to all
or any portion of the Property or Chattels, the cost to repair or
replace of which exceeds $10,000. Beneficiary may participate in
all negotiations and appear and participate in all judicial
arbitration proceedings concerning any insurance proceeds which may
be payable as a result of such casualty or damaging. Beneficiary
shall have the right (but not the obligation) to receive the
proceeds of all insurance for loss of or damage to the Property.
If Grantor fails to act reasonably and promptly in making
proof of loss, or settling or adjusting any claim, for any such
insurance proceeds, then Beneficiary shall have the right to make
such proof and settle and/or adjust, such claim; and the expenses
incurred by Beneficiary in the adjustment and collection of
insurance proceeds shall be a part of the Secured Obligations. Any
insurance proceeds received by Beneficiary with respect to an
insured casualty, net of any amounts necessary to pay costs and
expenses incurred by Beneficiary in connection with the collection
thereof, may, in Beneficiary's sole discretion, either (i) be
retained and applied by Beneficiary toward payment of the Secured
Obligations, or (ii) be paid over, in whole or in part and subject
to such conditions as Beneficiary may, in its sole discretion
exercised in good faith, impose, to Grantor to pay for repairs
or replacements necessitated by the casualty; provided, that if
all of the Secured Obligations have been performed or are
discharged by the application of less than all of such insurance
proceeds, then any remaining proceeds will be paid over to Grantor.
Notwithstanding the preceding sentence to the contrary, if (A) no
Default or Event of Default shall have occurred and be continuing
hereunder, and (B) the proceeds received by Beneficiary, together
with any other funds delivered by Grantor to Beneficiary for such
purpose, shall be sufficient, in Beneficiary's judgment, to pay for
any restoration necessitated by the casualty, and (C) the cost of
such restoration shall not exceed $200,000, and (D) such
restoration can be completed, in Beneficiary's judgment,
at least ninety (90) days prior to the maturity date of the Note,
then Beneficiary shall apply such proceeds as provided in clause
(ii) of the preceding sentence. Beneficiary will have no
obligation to see to the proper application of any insurance
proceeds paid over to Grantor. Beneficiary shall not be liable for
any interest on any proceeds applied as provided in clause (ii)
above. Beneficiary may, prior to the application of insurance
proceeds, commingle them with Beneficiary's own funds and otherwise
act with regard to such proceeds as Beneficiary may determine in
Beneficiary's sole discretion.
(e) Successor's Rights. Any person who acquires title to the
Property or the Chattels, upon foreclosure hereunder, will succeed
to all of Grantor's rights under all policies of insurance
maintained pursuant to this Section.
4.6 Maintenance and Repair of Property and Chattels.
Grantor will at all times maintain the Property and the Chattels in
good condition and repair, will diligently prosecute the completion
of any building or other improvement which is at any time in the
process of construction on the Property, and will promptly repair,
restore, replace, or rebuild any part of the Property or the
Chattels which may be affected by any casualty or any public or
private taking or injury to the Property or the Chattels. All
costs and expenses arising out of the foregoing shall be paid by
Grantor whether or not the proceeds of any insurance or eminent
domain shall be sufficient therefor. Grantor will comply with all
statutes, ordinances, and other governmental or quasi-governmental
requirements and private covenants relating to the ownership,
construction, use, or operation of the Property, including but not
limited to any environmental or ecological requirements; provided,
that so long as Grantor is not otherwise in default hereunder,
Grantor may, upon providing Beneficiary with security satisfactory
to Beneficiary, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, or
requirement. Beneficiary and any person authorized by Beneficiary
may enter and inspect the Property at all reasonable times, and may
inspect the Chattels, wherever located, at all reasonable times.
4.7 Performance of Lease Obligations. Grantor will
perform promptly all of Grantor's obligations under or in
connection with each present and future Lease of all or any part of
the Property. If Grantor receives within any three (3) month
period twenty (20) or more written communications from tenants
under the Leases asserting a breach or default by Grantor under any
Lease, or purporting to terminate or cancel any Lease prior to its
stated expiration date, Grantor will promptly forward a copy of
such communications, and any subsequent communications relating to
the Leases to Beneficiary. Grantor agrees that after the
occurrence of a Default, Beneficiary, in Beneficiary's sole
discretion, may advance any sum or take any action which
Beneficiary believes is necessary or required to maintain any Lease
in full force and effect, and all such sums advanced by
Beneficiary, together with all costs and expenses incurred by
Beneficiary in connection with action taken by Beneficiary pursuant
to this Section 4.7, shall be due and payable by Grantor to
Beneficiary upon demand, shall bear interest until paid at the
Default Rate (as defined in the Note), and shall be secured by this
Deed of Trust.
4.8 Eminent Domain; Private Damage. If all or any part
of any property encumbered hereby is taken or damaged by eminent
domain or any other public or private action, Grantor will notify
Beneficiary promptly of the time and place of all meetings,
hearings, trials, and other proceedings relating to such action.
Beneficiary may participate in all negotiations and appear and
participate in all judicial or arbitration proceedings concerning
any award or payment which may be due as a result of such taking or
damaging, and may, after the occurrence of an Event of Default or
if Grantor has not compromised or settled any claim for any such
award or payment within six (6) months of Grantor's receipt of
notice of any such taking or action, compromise or settle, in the
name of Beneficiary, Grantor or both, any claim for any such award
or payment. Any such award or payment is to be paid to Beneficiary
and will be applied first to reimburse Beneficiary for all costs
and expenses, including reasonable attorneys' fees, incurred by
Beneficiary in connection with the ascertainment and collection of
such award or payment. The balance, if any, of such award or
payment may, in Beneficiary's sole discretion, either (a) be
retained by Beneficiary and applied toward the Secured Obligations,
or (b) be paid over, in whole or in part and subject to such
conditions as Beneficiary may impose, to Grantor for the purpose of
restoring, repairing, or rebuilding any part of the encumbered
property affected by the taking or damaging. Notwithstanding the
preceding sentence to the contrary, if (i) no Default or Event of
Default shall have occurred and be continuing hereunder, and
(ii) the payment or award received by Beneficiary, together with
any other funds delivered by Grantor to Beneficiary for such
purpose, shall be sufficient in Beneficiary's judgment, to pay for
any restoration necessitated by the taking or damaging, and
(iii) the cost of such restoration shall not exceed $100,000, and
(iv) such restoration can be completed, in Beneficiary's judgment,
at least ninety (90) days prior to the maturity date of the Note,
and (v) the remaining Property shall constitute, in Beneficiary's
judgment, adequate security for the Secured Obligations, then
Beneficiary shall apply such proceeds as provided in clause (b) of
the preceding sentence. Beneficiary will have no duty to see to
the application of any part of any award or payment released to
Grantor. Grantor's duty to pay the Note in accordance with its
terms and to perform the other Secured Obligations will not be
suspended by the pendency or discharged by the conclusion of any
proceedings for the collection of any such award or payment, and
any reduction in the Secured Obligations resulting from
Beneficiary's application of any such award or payment will take
effect only when Beneficiary receives such award or payment. If
this Deed of Trust has been foreclosed prior to Beneficiary's
receipt of such award or payment, Beneficiary may nonetheless
retain such award or payment to the extent required to reimburse
Beneficiary for all costs and expenses, including reasonable
attorneys' fees, incurred in connection therewith, and to discharge
any deficiency remaining with respect to the Secured Obligations.
4.9 Mechanics' Liens. Grantor will keep the Property
free and clear of all liens and claims of liens by contractors,
subcontractors, mechanics, laborers, materialmen, and other such
persons, and will cause any recorded statement of any such lien to
be released of record within thirty (30) days after the recording
thereof. Notwithstanding the preceding sentence, however, Grantor
will not be deemed to be in default under this Section if and so
long as Grantor (a) contests in good faith the validity or amount
of any asserted lien and diligently prosecutes or defends an action
appropriate to obtain a binding determination of the disputed
matter, and (b) provides Beneficiary with a bond or other security
as Beneficiary may reasonably require to protect Beneficiary
against all loss, damage, and expense, including attorneys' fees,
which Beneficiary might incur if the asserted lien is determined to
be valid.
4.10 Defense of Actions. Grantor will defend, at Grantor's
expense, any action, proceeding or claim which affects any property
encumbered hereby or any interest of Beneficiary in such property
or in the Secured Obligations, and will indemnify and hold
Beneficiary harmless from all loss, damage, cost, or expense,
including reasonable attorneys' fees, which Beneficiary may incur
in connection therewith.
4.11 Expenses of Enforcement. Grantor will pay all costs
and expenses, including reasonable attorneys' fees, which
Beneficiary may incur in connection with any effort or action
(whether or not litigation or foreclosure is involved) to enforce
or defend Beneficiary's rights and remedies under any of the Loan
Documents, including but not limited to all reasonable attorneys'
fees, appraisal fees, consultants' fees, and other expenses
incurred by Beneficiary in securing title to or possession of, and
realizing upon, any security for the Secured Obligations. All such
costs and expenses (together with interest thereon at the Default
Rate from the date incurred) shall constitute part of the Secured
Obligations, and may be included in the computation of the amount
owed to Beneficiary for purposes of foreclosing or otherwise
enforcing this Deed of Trust.
4.12 Financial Reports. Within ninety (90) days after the
end of each fiscal year of Grantor, Grantor will furnish to
Beneficiary (a) Grantor's operating statements for the Property as
of the end of and for the preceding fiscal year, (b) an annual
certified rent roll signed and dated by Grantor detailing the names
of all tenants under the Leases, the portion of the improvements on
the Property occupied by each tenant, the rent and any other
charges payable under each Lease, and the term of each Lease, and
(c) an annual balance sheet and profit and loss statement of
Grantor and any Guarantor. The financial statements and reports
described in (a) and (c) above shall be in such detail
as Beneficiary may require, shall be prepared in accordance with
generally accepted accounting principles consistently applied, and
shall be certified as true and correct by Grantor or each
Guarantor, as applicable (or, if required by Beneficiary (i) at any
time after the occurrence of an Event of Default or (ii) during the
twelve (12) months following any late payment by Grantor under any
of the Loan Documents, by an independent certified public
accountant acceptable to Beneficiary). Grantor will also furnish
or cause to be furnished to Beneficiary within thirty (30) days of
Beneficiary's request, any other financial reports or statements of
Grantor including, without limitation, balance sheets, profit and
loss statements, other financial statements and certified rent
rolls, required under any of the Loan Documents, required by any
regulatory authority exercising jurisdiction over Beneficiary, or
reasonably requested by Beneficiary from time to time.
4.13 Priority of Leases. To the extent Grantor has the
right, under the terms of any Lease, to make such Lease subordinate
to the lien hereof, Grantor will, at Beneficiary's request and
Grantor's expense, take such action as may be required to effect
such subordination. Conversely, Grantor will, at Beneficiary's
request and Grantor's expense, take such action as may be necessary
to subordinate the lien hereof to any future Lease designated by
Beneficiary. Grantor shall not cause or permit any Lease to be or
become subordinate to any lien encumbering the Property or any
portion thereof or interest therein, other than the lien of this
Deed of Trust.
4.14 Inventories; Assembly of Chattels. Grantor will,
from time to time at the request of Beneficiary, supply Beneficiary
with a current inventory of the Chattels and the Intangible
Personalty, in such detail as Beneficiary may require. Upon the
occurrence of any Event of Default hereunder, Grantor will at
Beneficiary's request assemble the Chattels and make them available
to Beneficiary at any place designated by Beneficiary which is
reasonably convenient to both Grantor and Beneficiary.
4.15 Compliance with Laws, Etc. Grantor shall comply
with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, maintaining all Permits
and paying before the same become delinquent all taxes, assessments
and governmental charges imposed upon Grantor or the Property.
4.16 Records and Books of Account. Grantor shall keep
accurate and complete records and books of account, in which
complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all
financial transactions relating to the Property.
4.17 Inspection Rights. At any reasonable time, and from
time to time, Grantor shall permit Beneficiary, or any agents or
representatives of Beneficiary, to examine at Grantor's office in
Massachusetts and Texas and make copies of and abstracts from the
records and books of the accounts of Grantor, and to visit the
Property during normal business hours and to discuss the affairs,
finances and accounts of Grantor with Grantor.
4.18 Change of Executive Offices. Grantor shall promptly
notify Beneficiary if changes are made in the location of Grantor's
primary executive offices.
4.19 Further Assurances; Estoppel Certificates. Grantor
will execute and deliver to Beneficiary upon demand, and pay the
costs of preparation and recording thereof, any further documents
which Beneficiary may reasonably request to confirm or perfect the
liens and security interests created or intended to be created
hereby, or to confirm or perfect any evidence of the Secured
Obligations. Grantor will also, within ten (10) days after any
request by Beneficiary, deliver to Beneficiary a signed and
acknowledged statement certifying to Beneficiary, or to any
proposed transferee of the Secured Obligations, (a) the balance of
principal, interest, and other sums then outstanding under the
Note, and (b) whether Grantor claims to have any offsets or
defenses with respect to the Secured Obligations and, if so, the
nature of such offsets or defenses.
4.20 Costs of Closing. Grantor shall on demand pay
directly or reimburse Beneficiary for any costs or expenses
pertaining to the closing of the loan evidenced by the Note and
secured by this Deed of Trust, including, but not limited to, fees
of counsel for Beneficiary, costs and expenses for which invoices
were not available at the closing of such loan, or costs and
expenses which are incurred by Beneficiary after such closing. All
such costs and expenses (together with interest thereon at the
Default Rate from the date incurred by Beneficiary) shall
constitute a part of the Secured Obligations, and may be included
in the computation of the amount owed to Beneficiary for purposes
of foreclosing or otherwise enforcing this Deed of Trust.
4.21 Fund for Electronic Transfer. All monthly payments
of principal and interest on the Note, and escrow deposits under
this Deed of Trust, shall be made by Grantor by electronic funds
transfer from a bank account established and maintained by Grantor
for such purpose. Grantor shall establish and maintain such an
account until the Note is fully paid and shall direct the
depository of such account in writing to so transmit such payments
on or before the respective due dates to the account of Beneficiary
as shall be designated by Beneficiary in writing.
4.22 Notices to Grantee. Grantor shall promptly notify
Grantee of (a) any pending or threatened litigation, action,
proceeding or investigation against Grantor, any General Partner,
any Guarantor, or the Property before any court, governmental, or
quasi-governmental arbitrator or other authority; (b) the existence
of any special or other assessments for public improvements at any
time affecting the Property, any special assessments at any time
pending or threatened with respect to the Property, any
contemplated improvements affecting the Property that may result in
special assessments, or any tax abatements or exceptions affecting
the Property; (c) any federal, state, county, municipal or other
governmental plan to change the highway or road system in the
vicinity of the Property or to restrict or change access from any
such highway or road to the Property; or (d) any event or
occurrence that affects or could affect the availability of
adequate utility services for the full ownership, occupancy,
operation, or maintenance of the Property. Grantor shall promptly
deliver to Grantee any notice from a governmental body having
jurisdiction over the Property of a violation of any applicable
law, or any notice from any insurance company or inspection or
rating bureau setting forth a requirement as a condition to the
continuance of any insurance coverage on or with respect to the
Property or the continuation thereof at premium rates then in
effect.
4.23 Use. Grantor shall use the Property solely for the
operation of a multi-family residential dwelling facility and for
no other use or purpose.
4.24 Management. The Property shall be managed by Krupp
Realty Company Limited Partnership, a Massachusetts limited
partnership ("Manager") under a management agreement approved by
Beneficiary (the "Management Agreement"). Grantor shall not permit
any amendment to or modification of the Management Agreement, or
management of the Property by any person or entity other than
Manager, without the prior written consent of Beneficiary, which
consent shall not be unreasonably withheld or delayed.
ARTICLE V
GRANTOR'S NEGATIVE COVENANTS
5.1 Waste and Alterations. Grantor will not commit or
permit any waste with respect to the Property or the Chattels.
Grantor shall not cause or permit any part of the Property,
including but not limited to any building, structure, parking lot,
driveway, landscape scheme, timber, or other ground improvement, to
be removed, demolished, or materially altered without the prior
written consent of Beneficiary.
5.2 Zoning and Private Covenants. Grantor will not
initiate, join in, or consent to any change in any zoning ordinance
or classification, any change in the "zone lot" or "zone lots" (or
similar zoning unit or units) presently comprising the Property,
any transfer of development rights, any private restrictive
covenant, or any other public or private restriction limiting or
defining the uses which may be made of the Property or any part
thereof, without the express written consent of Beneficiary. If
under applicable zoning provisions the use of all or any part of
the Property is or becomes a nonconforming use, Grantor will not
cause such use to be discontinued or abandoned without the express
written consent of Beneficiary.
5.3 Leases. Grantor will neither do nor neglect to do
anything which may cause or permit the termination of any Lease of
all or any part of the Property, or cause or permit the withholding
or abatement of any rent payable under any such Lease. Except with
the prior written consent of Beneficiary, which may be granted or
withheld in Beneficiary's sole discretion, Grantor will not
(a) collect rent from all or any part of the Property for more than
one month in advance, (b) other than in the ordinary course of
prudent operation of an apartment complex, modify any Lease of all
or any part of the Property, (c) assign the rents from the Property
or any part thereof, or (d) other than in the ordinary course of
prudent operation of an apartment complex, consent to the
cancellation or surrender of all or any part of any such Lease,
except that Grantor may in good faith terminate any such Lease for
nonpayment of rent or other material breach by the tenant. Without
Beneficiary's prior written consent, which may be granted or
withheld in Beneficiary's sole discretion, Grantor shall not enter
into or modify any Lease of all or any part of the Property if such
Lease or modification (i) results in an average net rental of less
than $374 per leased apartment unit per month, (ii) provides for an
original term of less than six (6) months, (iii) results in the
Leases covering, in the aggregate, less than eighty-two
percent (82%) of all leasable apartment units, (iv) is on a form
other than the form delivered to and approved by Beneficiary, or
(v) is not an arm's length transaction; provided, however, that
Grantor may, without the prior written consent of Beneficiary, (A)
enter into or modify Leases covering, in the aggregate, not more
than ten percent (10%) of the leasable apartment units to provide
for original terms of less than six (6) months, and (B) enter into
a maximum of five (5) Leases with employees of the Manager. Any
lease entered into by Grantor subsequent to the date hereof shall
provide (I) that such Lease is subordinate to this Deed of Trust,
and (II) that all tenants under such Lease or modification agree to
attorn to Beneficiary.
Transfer or Further Encumbrance of Property.
(a) The entire balance of the Note, plus any applicable
prepayment premium, shall become immediately due and payable at the
option of Beneficiary if any of the following events occurs without
Beneficiary's prior written consent which may be withheld for any
reason: Grantor sells, conveys, leases, assigns, or otherwise
transfers, disposes of, or is divested of its title to, or
mortgages, conveys security title to, or otherwise encumbers or
causes to be encumbered, the Property or any part thereof or
interest therein in any manner or way, whether voluntary or
involuntary, or causes or permits to occur any of the following:
(i) any merger, consolidation or dissolution involving, or the sale
or transfer of all or substantially all of the assets of, Grantor
or any General Partner, (ii) the transfer (at one time or over any
period of time) of 49% or more of the voting stock of (A) a
corporate Grantor, (B) any corporate General Partner or (C) any
corporation which is the direct or indirect owner of 49% or more of
the voting stock of Grantor or any General Partner, (iii) the
transfer of any general partnership interest in Grantor or a
controlling interest in any partnership which is a General Partner,
or (iv) the conversion of any such general partnership interest to
a limited partnership interest. Any of the events described in the
preceding sentence shall be hereinafter referred to as a
"Transfer." Beneficiary may make its consent subject to such
conditions as it in its sole discretion may elect, including, but
not limited to, payment of an assumption fee by Grantor, an
increase in the rate of interest borne by the Secured Obligations,
or a modification of the maturity date of the Note. Consent to one
such Transfer by Beneficiary shall not be deemed a waiver to
require such consent to further or future Transfers. This
provision shall not apply to transfers of title or interest under
any will or testament or applicable law of descent.
(b) Notwithstanding the preceding subparagraph (a) or
anything else herein to the contrary, Lender shall permit a
one-time transfer of the Property provided that all of the
following conditions are satisfied: (i) no Default or Event of
Default has occurred; (ii) Borrower has paid to Lender an
assumption fee of one percent (1%) of the principal balance of the
Secured Obligations; (iii) if the proposed transferee is a land
trust, Lender has received a first-lien collateral assignment of
all beneficial interest therein; (iv) Lender has received and had
a reasonable opportunity to review all documents and agreements
executed or to be executed in connection with the proposed
transfer; (v) the non-economic terms (i.e., those terms other than
interest rates, payment schedules, principal balance, and
non-recourse nature (subject to exceptions thereto customarily
included by Lender in loan documents)) of the Loan Documents have
been modified as Lender may request in good faith; (vi) the
proposed transferee has assumed the obligations of the transferor
under the Loan Documents; (vii) Lender has received at least thirty
(30) days' prior written notice of the proposed transfer;
(viii) the proposed transferee and, if applicable, its general
partners have, in the sole judgment of Lender exercised in good
faith, a net worth equal to the net worth of Borrower as of the
date hereof or otherwise satisfactory to Lender, and a satisfactory
history of owning, operating and leasing property similar to the
Property; (ix) the proposed transferee and, if applicable, its
general partners have, in the sole judgment of Lender exercised in
good faith, a satisfactory credit history and professional
reputation and character; (x) the Debt Service Coverage Ratio (as
hereinafter defined) is not less than 1.35, and Lender receives
satisfactory evidence that such ratio will be maintained for the
succeeding twelve (12) months; (xi) the Loan-to-Value Ratio (as
hereinafter defined), taking into account all obligations secured
by liens on the Property does not exceed (A) seventy percent (70%)
during the first and second loan years, (B) sixty-nine percent
(69%) during the third loan year, (C) sixty-eight percent (68%)
during the fourth loan year, (D) sixty-seven percent (67%) during
the fifth loan year, (E) sixty-six percent (66%) during the sixth
loan year and (F) sixty-five percent (65%) during the seventh loan
year; (xii) Borrower pays all costs and expenses incurred by Lender
in connection with such transfer, including, without limitation,
all legal, processing, accounting, title insurance, and appraisal
fees, whether or not such transfer is actually consummated; and
(xiii) at Lender's option and if available, Lender has received an
endorsement to its mortgagee's title insurance policy at Borrower's
expense, which endorsement states that the lien of this Deed to
Secure Debt remains a first and prior lien against the Property
subject to no exceptions other than as approved by Lender. If, at
the time of the proposed conveyance, the Loan-to-Value Ratio would
exceed the allowed percentage hereunder, Grantor may prepay a
portion of the Note in order to reduce the outstanding principal
balance of the Note to an amount which would reduce the
Loan-to-Value Ratio to the allowed percentage. If Grantor makes
such partial prepayment for the purposes described above, Grantor
shall pay a prepayment premium equal to the highest prepayment
premium required under the Note calculated as if the Note were
being prepaid in full and without regard to any prohibition on
prepayment set forth therein), multiplied by a ratio, the numerator
of which is the amount being prepaid by Grantor, and the
denominator of which is the then-outstanding principal balance of
the Note. The term "loan year" as used in this paragraph shall
mean each complete 365-day period after April 1, 1994. Upon the
satisfaction of the foregoing conditions, Lender shall release
Borrower from liability under the Loan Documents except to the
extent that, prior to such release, any full-recourse liability has
arisen under any of the Loan Documents. The foregoing right to
transfer the Property shall terminate upon conveyance of the
Property by the initial Borrower named herein.
(c) The term "Debt Service Coverage Ratio" shall mean the
ratio, as determined by Lender of (i) Net Operating Income (as
hereinafter defined) for the Property for the preceding
twelve-month period to (ii) the aggregate debt service payments for
the following twelve-month period on the Note and on all other
indebtedness secured, or to be secured, by a lien on all or any
part of the Property. The term "Net Operating Income" shall mean
all gross income, revenues and consideration of whatever form or
nature received by or paid to or for the account of or benefit of
Borrower, its agents or employees, from any and all sources
resulting from or attributable to the Property minus all reasonable
expenses actually incurred by Borrower in respect of the ownership,
operation, leasing and occupancy of the Property, but excluding:
(a) depreciation expenses and other income tax related bookkeeping
entries which do not result in the payment of monies, and, (b) any
and all payments to be made by Borrower pursuant to the terms of
the Loan Documents. The "Loan-to-Value Ratio" shall be the ratio,
as determined by Lender, of the aggregate principal balance of the
Note and all other indebtedness secured by liens and encumbrances
against the Property to the fair market value of the Property, as
such fair market value is determined by an M.A.I. appraisal
satisfactory to Lender (the "Appraisal"). Upon Lender's request,
Borrower shall deliver the Appraisal to Lender at Borrower's sole
cost and expense.
5.5 Further Encumbrance of Chattels and Intangible
Personalty. Grantor will neither create nor permit any lien or
encumbrance against the Chattels or Intangible Personalty, or any
part thereof or interest therein, other than the liens and security
interests created by the Loan Documents without the prior written
consent of Beneficiary, which may be withheld for any reason.
5.6 Assessments Against Property. Grantor will not,
without the prior written approval of Beneficiary, which may be
withheld for any reason, consent to the creation of any so-called
special districts, special improvement districts, benefit
assessment districts or similar districts, or any other body or
entity of any type, or allow to occur any other event, that would
or might result in the imposition of any additional taxes,
assessments or other monetary obligations or burdens on the
Property, and this provision shall serve as RECORD NOTICE to any
such district or districts or any governmental entity under who~e
authority such district or districts exist or are being formed
that, should Grantor or any other person or entity include all or
any portion of the Property in such district or districts, whether
formed or in the process of formation, without first obtaining
Beneficiary's express written consent, the rights of Beneficiary in
the Property pursuant to this Deed of Trust or following any
foreclosure of this Deed of Trust, and the rights of any person or
entity to whom Beneficiary might transfer the Property following a
foreclosure of this Deed of Trust, shall be senior and superior to
any taxes, charges, fees, assessments or other impositions of any
kind or nature whatsoever, or liens (whether statutory, contractual
or otherwise) levied or imposed, or to be levied or imposed, upon
the Property or any portion thereof as a result of inclusion of the
Property in such district or districts.
5.7 Transfer or Removal of Chattels. Grantor will not
sell, transfer or remove from the Property all or any part of the
Chattels, unless the items sold, transferred, or removed are
simultaneously replaced with similar items of equal or greater
value.
5.8 Change of Name. Grantor will not change the name
under which Grantor does business, or adopt or begin doing business
under any other name or assumed or trade name, without first
notifying Beneficiary of Grantor's intention to do so and
delivering to Beneficiary such executed modifications or supple-
ments to this Deed of Trust, and to any financing statement which
may be filed in connection herewith, as Beneficiary may require.
5.9 Improper use of Property or Chattels. Grantor will
not use the Property or the Chattels for any purpose or in any
manner which violates any applicable law, ordinance, or other
governmental requirement, the requirements or conditions of any
insurance policy, or any private covenant.
5.10 Use of Proceeds. Grantor will not use any funds
advanced by Beneficiary under the Loan Documents for any purpose
other than as permitted by the provisions of the Loan Documents.
5.11 Hazardous Substances. Grantor will not itself, nor
will it allow any person to (i) install on the Property any friable
asbestos or any substance containing friable asbestos or (ii) use,
store, or Release any Hazardous Substances in, on, about or under
the Property, except in accordance with applicable law and normal
business practices for projects similar in use to the Property.
From time to time during the term of the Note, if Beneficiary has
knowledge of any pending or threatened Environmental Claim against
Grantor or the Property, has reason to believe that Grantor or the
Property are in violation of any Environmental Law, or is required
by any governmental or other regulatory agency to obtain an
environmental site assessment report, at Beneficiary's written
request, Grantor shall submit to Beneficiary, at its own expense,
a report satisfactory to Beneficiary in its sole and absolute
discretion, prepared by a consultant selected by Beneficiary,
certifying that the Property is not then being used nor has it been
used in the past for any activities involving, directly or
indirectly, the use, generation, treatment, storage or disposal of
any Hazardous Substances. In the event of an Environmental Claim
or if Hazardous Substances are discovered in, on, about or under
the Property, Grantor shall, at its sole cost and expense, comply
with all Environmental Laws relative to such Hazardous Substances,
pay immediately when due the cost of removal of any such Hazardous
Substances and keep the Property free of any lien imposed pursuant
to such Environmental Laws, whether or not such lien has priority
over the lien created by this Deed of Trust. In the event Grantor
fails to comply with the provisions of this Section within fifteen
(15) days after notice of noncompliance or such shorter period as
is mandated by applicable law or, if compliance is not feasible
within such fifteen (15) days or shorter period, if Grantor shall
fail within such fifteen-day period to engage an environmental
consultant or thereafter promptly commence and diligently pursue
implementation of a program aimed at compliance with such
provisions, which program is satisfactory to Beneficiary in
Beneficiary's sole and absolute discretion and in accordance with
applicable law, or, having commenced such a program, if Grantor
shall fail to diligently pursue such program to completion,
Beneficiary may, in Beneficiary's sole and absolute discretion,
declare an Event of Default and/or cause the Hazardous Substances
to be removed from the Property. At the option of Beneficiary, to
be exercised only by express notice to Grantor, the cost of such
removal shall be additional Secured Obligations secured.hereby and
shall become immediately due and payable without notice and with
interest thereon at the Default Rate (as defined in the Note).
Grantor shall give to Beneficiary, Beneficiary's agents and
employees access to the Property and hereby specifically grants to
Beneficiary, for the term of the Note, a license to enter upon the
Property for the purposes of conducting tests and investigations
for Hazardous Substances, and to remove any Hazardous Substances.
Grantor acknowledges and agrees that in the event Hazardous
Substances are caused to be removed from the Property by Grantor or
Beneficiary, the Environmental Protection Agency number, manifest
number or similar identification assigned to the Hazardous
Substances so removed shall be solely in the name of Grantor and
Grantor shall assume all liability for such removed Hazardous
Substances. Notwithstanding any non-recourse provisions of the
Note or any other provision in any Loan Document, Beneficiary shall
be entitled to bring an in personam action against Grantor,
including an action for specific performance or damages, to enforce
the provisions of this Section.
5.12 ERISA. Grantor shall not engage in any transaction
which would cause the Note secured hereby, or the exercise by
Beneficiary of any of Beneficiary's rights under the Loan
Documents, to be a non-exempt, prohibited transaction under ERISA
(including for this purpose the parallel provisions of Section 4975
of the Internal Revenue Code of 1986, as amended), or otherwise
result in Beneficiary being deemed in violation of any applicable
provisions of ERISA. Grantor shall indemnify, protect, defend, and
hold Beneficiary harmless from and against any and all losses,
liabilities, damages, claims, judgments, costs, and expenses
(including, without limitation attorneys~ fees and costs incurred
in the investigation, defense, and settlement of claims and in
obtaining any individual ERISA exemption or state administrative
exception that may be required, in Beneficiary's sole and absolute
discretion) that Beneficiary may incur, directly or indirectly, as
the result of the breach by Grantor of any warranty or
representation set forth in Section 3.2(w) hereof or the breach by
Grantor of any covenant contained in this Section 5.12. This
indemnity shall survive any termination, satisfaction or
foreclosure of this Deed of Trust and shall not be subject to the
limitation on personal liability described in Section 9.4 hereof.
ARTICLE VI
EVENTS OF DEFAuLT
Each of the following events will constitute a default (an
"Event of Default") under this Deed of Trust and under each of the
other Loan Documents:
6.1 Failure to Pay Note. Grantor's failure to make any
payment when due under the terms of the Note or any other Loan
Document;
6.2 Other Obligations. The failure of Grantor to
properly perform any obligation contained herein or in any of the
other Loan Documents (other than the obligation to make payments
under the Note or the other Loan Documents) and the continuance of
such failure for a period of ten (1O) days following written notice
thereof from Beneficiary to Grantor; provided, however, that if
such failure is not curable within such ten (10) day period, then,
so long as Grantor commences to cure such failure within such ten
(10) day period and is continually and diligently attempting to
cure to completion, such failure shall not be an Event of Default
unless such failure remains uncured for sixty (60) days after such
written notice to Grantor;
6.3 Levy Against Property. The levy against any of the
Property, Chattels, or Intangible Personalty of any execution,
attachment, sequestration or other writ;
6.4 Appointment of Receiver. The appointment of a
trustee or receiver for Grantor, any General Partner or any
Guarantor, or the assets or any part thereof of Grantor, any
General Partner, any Guarantor or any other person directly or
indirectly liable for the Secured Obligations, whether as maker,
endorser, guarantor, surety, general partner or otherwise, or the
appointment of a trustee or receiver for any real or personal
property, or the like, or any part thereof, representing the
security for the Note;
6.5 Dissolution or Assignment. The dissolution,
termination, or liquidation of Grantor, any General Partner, any
Guarantor, or of any other person or entity directly or indirectly
liable for the Secured Obligations, whether as maker, endorser,
guarantor, surety, general partner or otherwise, or the making by
any such person of any transfer in fraud of creditors or assignment
for the benefit of creditors;
6.6 Order for Relief. The entry in bankruptcy of an
order for relief for or against Grantor, any General Partner, any
Guarantor, or any other party directly or indirectly liable for the
payment of the Note, whether as maker, endorser, guarantor, surety,
general partner or otherwise;
6.7 Bankruptcy. The filing of any petition (or answer
admitting the material allegations of any petition), or other
pleading, seeking entry of an order for relief for or against
Grantor, any General Partner, any Guarantor or any other party
directly or indirectly liable for the payment of the Note, whether
as maker, endorser, guarantor, surety, general partner or otherwise
as a debtor or bankrupt or seeking an adjustment of such parties'
debts, or any other relief under any state or federal bankruptcy,
reorganization, debtor's relief or insolvency laws now or hereafter
existing, including, without limitation, a petition or answer
seeking reorganization or admitting the material allegations of a
petition filed against any of such parties in any bankruptcy or
reorganization proceeding, or the act of any of such.parties in
instituting or voluntarily being or becoming a party to any other
judicial proceedings intended to effect a discharge of the debts of
any such parties, in whole or in part, or a postponement of the
maturity or the collection thereof, or a suspension of any of the
rights or powers of a trustee or of any of the rights or powers
granted to Beneficiary herein, or in any other document executed in
connection herewith; provided, however, that no Event of Default
shall occur under this Section 6.7 if an involuntary bankruptcy or
insolvency petition is filed against Grantor, any General Partner,
any Guarantor or any other party directly or indirectly liable for
the payment of the Note unless such petition is not dismissed
within sixty (60) days following its filing;
6.8 Misrepresentation. If any representation or
warranty made by Grantor, any General Partner, any Guarantor or any
other party liable for the payment of the Note, whether as maker,
endorser, guarantor, surety, general partner or otherwise, herein,
or in any of the other Loan Documents or any other instrument or
document modifying, renewing, extending, evidencing, securing or
pertaining to the Note is false, misleading or erroneous in any
material respect;
6.9 Judgments. The failure of Grantor, any General
Partner, any Guarantor or any party liable for the payment of the
Note, whether as maker, endorser, guarantor, surety or otherwise,
to pay any money judgment in excess of $10,000 against any such
party before the expiration of thirty (30) days after such judgment
becomes final and no longer appealable;
6.10 Admissions Regarding Debts. The admission of
Grantor, any General Partner any Guarantor or any other party
liable for the payment of the Note, whether as maker, endorser,
guarantor, surety, general partner or otherwise, in writing of
any such party's inability to pay such party's debts as they
become due;
6.11 Assertion of Priority. The assertion of any claim of
priority over this Deed of Trust, by title, lien, or otherwise,
unless Grantor within 30 days after such assertion either causes
the assertion to be withdrawn or provides Beneficiary with such
security as Beneficiary may require to protect Beneficiary against
all loss, damage, or expense, including attorneys' fees, which
Beneficiary may incur in the event such assertion is upheld;
6.12 Loan Documents. The occurrence of any default by
Grantor (after the lapse of any applicable grace or cure period),
or the occurrence of any event or circumstance defined as a default
or an Event of Default, under any of the Loan Documents other than
this Deed of Trust;
6.13 Other Liens. The occurrence of any default by
Grantor (after the lapse of any applicable grace or cure period),
or the occurrence of any event or circumstance defined as an Event
of Default, under any other consensual lien encumbering the
Property, or any part thereof or interest therein, or any document
or instrument evidencing obligations secured thereby; or
6.14 Other Indebtedness. The occurrence of any default by
Grantor (after the lapse of any applicable grace or cure period),
or the occurrence of any event or circumstance defined as an Event
of Default, under any other indebtedness incurred or owing by
Grantor and of which Grantor is a direct obligor to Beneficiary or
any affiliate of Beneficiary, or any document or instrument
evidencing any obligation to pay such indebtedness.
ARTICLE VII
BENEFICIARY'S REMEDIES
Immediately upon or any time after the occurrence of any
Event of Default hereunder, Beneficiary may exercise any remedy
available at law or in equity, including but not limited to those
listed below and those listed in the other Loan Documents, in such
sequence or combination as Beneficiary may determine in
Beneficiary's sole discretion:
7.1 Performance of Defaulted Obligations. Beneficiary
may make any payment or perform any other obligation under the Loan
Documents which Grantor has failed to make or perform, and Grantor
hereby irrevocably appoints Beneficiary as the true and lawful
attorney-in-fact for Grantor to make any such payment and perform
any such obligation in the name of Grantor. All payments made and
expenses (including reasonable attorneys' fees and expenses)
incurred by Beneficiary in this connection, together with interest
thereon at the Default Rate (as defined in the Note) from the date
paid or incurred until repaid, will be part of the Secured
Obligations and will be immediately due and payable by Grantor to
Beneficiary. In lieu of advancing Beneficiary's own funds for such
purposes, Beneficiary may use any funds of Grantor which may be in
Beneficiary's possession, including but not limited to insurance or
condemnation proceeds and amounts deposited for taxes, insurance
premiums, or other purposes.
7.2 Specific Performance and Injunctive Relief.
Notwithstanding the availability of legal remedies, Beneficiary
will be entitled to obtain specific performance, mandatory or
prohibitory injunctive relief, or other equitable relief requiring
Grantor to cure or refrain from repeating any Default.
7.3 Acceleration of Secured Obligations. Beneficiary
may, without notice or demand, declare all of the Secured
Obligations immediately due and payable in full.
7.4 Suit for Monetary Relief. Subject to Section 9.4
hereof, with or without accelerating the maturity of the Secured
Obligations, Beneficiary may sue from time to time for any payment
due under any of the Loan Documents, or for money damages resulting
from Grantor's Default under any of the Loan Documents.
7.5 Possession of Property. Beneficiary may enter and
take possession of the Property without seeking or obtaining the
appointment of a receiver, may employ a managing agent for the
Property, and may lease or rent all or any part of the Property,
either in Beneficiary's name or in the name of Grantor, and may
collect the rents, issues, and profits of the Property. Any
revenues collected by Beneficiary under this Section will be
applied first toward payment of all expenses (including attorneys'
fees) incurred by Beneficiary, together with interest thereon at
the Default Rate from the date incurred until repaid, and the
balance, if any, will be applied against the Secured Obligations,
in such order and manner as Beneficiary may elect in its sole
discretion.
7.6 Enforcement of Security Interests. Beneficiary may
exercise all rights of a secured party under the Code with respect
to the Chattels and the Intangible Personalty, including but not
limited to taking possession of, holding, and selling the Chattels
and enforcing or otherwise realizing upon any accounts and general
intangibles. Any requirement for reasonable notice of the time and
place of any public sale, or of the time after which any private
sale or other disposition is to be made, will be satisfied by
Beneficiary's giving of such notice to Grantor at least ten ~10)
days prior to the time of any public sale or the time after which
any private sale or other intended disposition is to be made.
7.7 Foreclosure Against Property.
(a) Grantor authorizes and empowers the Trustee, at the
request of Beneficiary, to sell all or any portion of the Property,
at public auction, to the highest bidder, for cash or for credit
against the Secured Obligations if Beneficiary is the highest
bidder, at the county court house of the county in Texas in which
such Property or any part thereof is situated, as herein described,
in the area designated by the commissioners court for such purpose
pursuant to a recordation of such designation in the real property
records of such county, or if no such recorded designation by the
commissioners court has been made, in the area at the county court
house designated in the notice of proposed sale posted, filed and
served in accordance with the further provisions of this paragraph,
between the hours of 10:00 o'clock A.M. and 4:00 o'clock P.M. on
the first Tuesday of any month. The Trustee shall give notice of
the time, place and terms of said sale, and of the property to be
sold, as follows:
Notice of such proposed sale shall be given by posting written
notice thereof at least twenty-one days preceding the date of the
sale at the court house door, and by filing a copy of the notice in
the office of the county clerk of the county in which the sale is
to be made, and if the property to be sold is situated in more than
one county, one notice shall be posted at the court house door and
filed with the county clerk of each county in which the property to
be sold is situated. In addition, Beneficiary shall, at least
twenty-one days preceding the date of sale, serve written notice of
the proposed sale by certified mail on each debtor obligated to pay
the Secured Obligations according to the records of
Beneficiary. Service of such notice shall be completed upon
deposit of the notice, enclosed in a postpaid wrapper, properly
addressed to such debtor at the most recent address as shown by the
records of Beneficiary, 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.
Any notice that is required or permitted to be given to Grantor may
be addressed to Grantor at Grantor's mailing address. Any notice
that is to be given to any other debtor may, if no address for such
other debtor is shown by the records of Beneficiary, be addressed
to such other debtor at Grantor's mailing address. Notwithstanding
the foregoing provisions of this Section, notice of such sale given
in accordance with the requirements of the applicable law of
the State of Texas in effect at the time of such sale shall
constitute sufficient notice of such sale. Grantor hereby
authorizes and empowers the Trustee to sell all or any portion of
the Property, together or in lots or parcels, as the Trustee may
deem expedient, and to execute and deliver to the purchaser or
purchasers of such property, good and sufficient deeds of
conveyance of fee simple title with covenants of special warranty
made on behalf of the Grantor. In no event shall the Trustee be
required to exhibit, present or display at any such sale, any of
the personalty described herein to be sold at such sale. All
reasonable fees, costs and expenses of any kind incurred by
Beneficiary in connection with foreclosure of this Deed of
Trust, including, without limitation, the costs of any
appraisals of the Property obtained by Beneficiary, the costs of
any title reports or abstracts incurred by Beneficiary, all costs
of any receivership for the Property advanced by Beneficiary,
and all attorneys' and consultants' fees incurred by
Beneficiary, shall constitute a part of the Secured Obligations
and may be included as part of the amount owing from Grantor to
Beneficiary at any foreclosure sale. The Trustee making such sale
shall receive the proceeds thereof and shall apply the same as
follows: (i) first, he shall pay the reasonable expense of
executing this trust including a reasonable Trustee's fee or
commission; (ii) second, he shall pay, so far as may be possible,
the Secured Obligations, discharging first that portion of
the Secured Obligations arising under the covenants or
agreements herein contained and not evidenced by the Note; (iii)
third, he shall pay the residue, if any, to the person or persons
legally entitled thereto. Payment of the purchase price to the
Trustee shall satisfy the obligation of the purchaser at such sale
therefor, and such purchaser shall not be bound to look after the
application thereof. The sale or sales by the Trustee of less than
the whole of the Property shall not exhaust the power of sale
herein granted, and the Trustee is specifically empowered to
make a successive sale or sales under such power until the whole of
the Property shall be sold; and if the proceeds of such sale or
sales of less than the whole of such Property shall be less than
the aggregate of the Secured Obligations and the expenses of
executing this trust, this Deed of Trust and the lien, security
interest and assignment hereof shall remain in full force and
effect as to the unsold portion of the Property just as though no
sale or sales had been made; provided, however, that Grantor
shall never have any right to require the sale or sales of less
than the whole of the Property, but Beneficiary shall have the
right, at its sole election, to request the Trustee to sell less
than the whole of the Property. The holder of the Secured
Obligations or any part thereof on which the payment is delinquent
shall have the option to proceed with foreclosure in satisfaction
of such item either through judicial proceedings or by directing
the Trustee to proceed as if under a full foreclosure, conducting
the sale as herein provided without declaring all Secured
Obligations due, and if sale is made because of default of an
installment, or a part of an installment, such sale may be made
subject to the unmatured part of the Note and other Secured
Obligations; and it is agreed that such sale, if so made, shall
not in any manner affect the unmatured part of the Secured
Obligations secured by this Deed of Trust, but as to such unmatured
part, this Deed of Trust shall remain in full force and effect as
though no sale had been made under the provisions of this Section.
Several sales may be made hereunder without exhausting the right
of sale for any unmatured part of the Secured Obligations.
(b) Grantor hereby agrees, in its behalf and in behalf of
its heirs, executors, administrators, successors, personal
representatives and assigns, that any and all statements of fact or
other recitals made in any deed of conveyance given by the Trustee,
with respect to the identity of Beneficiary, or with respect to the
occurrence or existence of any Event of Default, or with respect
to the acceleration of the maturity of the Secured Obligations,
or with respect to the request to sell, the notice of sale, the
giving of notice to all debtors legally entitled thereto, the time,
place, terms, and manner of sale, and receipt, distribution,
and application of the money realized therefrom, or with respect
to the due and proper appointment of a substitute Trustee (as
provided in Section 9.17 hereof), and, without being limited by
the foregoing, with respect to any other act or thing having been
duly done by the Beneficiary or by the Trustee hereunder,
shall be Prima facie evidence that the statements or recitals are
true and correct, and Grantor hereby ratifies and confirms
every act that the Trustee or any substitute Trustee hereunder may
lawfully do in the premises by virtue hereof.
(c) The purchaser at any trustee's or foreclosure sale
hereunder may disaffirm any easement granted, or rental, Lease or
other contract made, in violation of any provision of this Deed of
Trust, and may take immediate possession of the Property free from,
and despite the terms of, such grant of easement and rental or
Lease contract.
(d) Beneficiary shall have the right to become the purchaser
at all sales to enforce this trust, being the highest bidder, and
to have the Secured Obligations owing, or any part thereof,
credited against the amount for which such property is sold.
7.8 Appointment of Receiver. To the extent
permitted by law, Beneficiary shall be entitled, as a matter of
absolute right and without regard to the value of any security for
the Secured Obligations or the solvency of any person liable
therefor, to the appointment of a receiver for the Property
upon ex-parte application to any court of competent jurisdiction.
Grantor waives any right to any hearing or notice of hearing prior
to the appointment of a receiver. Such receiver and its agents
shall be empowered, but shall not be obligated (a) to take
possession of the Property and any businesses conducted by Grantor
or any other person thereon and any business assets used in
connection therewith, (b) to exclude Grantor and Grantor's agents,
servants, and employees from the Property, (c) to collect the
rents, issues, profits, and income therefrom, (d) to complete any
construction which may be in progress, (e) to do such maintenance
and make such repairs and alterations as the receiver deems
necessary, (f) to use all stores of materials, supplies, and
maintenance equipment on the Property and replace such items at the
expense of the receivership estate, (g) to pay all taxes and
assessments against the Property and the Chattels, all premiums for
insurance thereon, all utility and other operating expenses, and
all sums due under any prior or subsequent encumbrance, and (h)
generally to do anything which Grantor could legally do if Grantor
were in possession of the Property. All expenses incurred by the
receiver or its agents shall constitute a part of the Secured
Obligations. Any revenues collected by the receiver shall be
applied first to the expenses of the receivership, including
reasonable attorneys' fees incurred by the receiver and by
Beneficiary, together with interest thereon at the Default Rate
from the date incurred until repaid, and the balance shall be
applied toward the Secured Obligations in such order or manner as
Beneficiary may in its sole discretion elect or in such other
manner as the court may direct. Unless sooner terminated with the
express consent of Beneficiary, any such receivership will
continue until the Secured Obligations have been discharged in
full, or until title to the Property has passed after foreclosure
sale and all applicable periods of redemption have expired.
7.9 Right to Make Repairs, Improvements. Should any
part of the Property come into the possession of Beneficiary,
whether before or after an Event of Default, Beneficiary may, but
shall not be obligated to, use, operate, and/or make repairs,
alterations, additions and improvements to the Property for the
purpose of preserving it or its value. Grantor covenants to
promptly reimburse and pay to Beneficiary, at the place where the
Note is payable, or at such other place as may be designated by
Beneficiary in writing, the amount of all reasonable expenses
(including the cost of any insurance, taxes, or other charges)
incurred by Beneficiary in connection with Beneficiary's custody,
preservation, use or operation of the Property, together with
interest thereon from the date incurred by Beneficiary at the
Default Rate, and all such expenses, costs, taxes, interest, and
other charges shall be a part of the Secured Obligations. It is
agreed, however, that the risk of accidental loss or damage to the
Property is undertaken by Grantor and Beneficiary shall have no
liability whatsoever for decline in value of the Property, for
failure to obtain or maintain insurance, or for failure to
determine whether any insurance ever in force is adequate as to
amount or as to the risks insured.
7.10 Collateral for All Obligations. Grantor
acknowledges that the Property is collateral for the full amount of
the Secured Obligations. Neither Beneficiary nor Trustee shall be
required to marshall all or any part of the Property or proceed
against all or any part of the Property in any particular sequence,
and Beneficiary shall not be limited in the amount it can recover
from the Property to satisfy the Secured Obligations.
ARTICLE VIII
ASSIGNMENT O~ LEASES AND RENTS
8.1 Assignment of Leases and Rents. Grantor hereby
absolutely and presently grants, transfers and assigns unto
Beneficiary all rents, royalties, issues, profits and income
("Rents") now or hereafter due or payable for the occupancy or use
of the Property, and all Leases, whether written or oral, with all
security therefor, including all guaranties thereof, now or
hereafter affecting the Property; reserving unto Grantor, however,
a license to collect and retain such Rents prior to the occurrence
of any Event of Default hereunder. Such license shall be revocable
by Beneficiary without notice to Grantor at any time after the
occurrence of an Event of Default. Grantor represents that the
Rents and the Leases have not been heretofore sold, assigned,
transferred or set over by any instrument now in force and will not
at any time during the life of this assignment be sold, assigned,
transferred or set over by Grantor or by any person or persons
whomsoever; and Grantor has good right to sell, assign, transfer
and set over the same and to grant to and confer upon Beneficiary
the rights, interest, powers and authorities herein granted and
conferred. Failure of Beneficiary at any time or from time to time
to enforce the assignment of Rents and Leases under this Section
shall not in any manner prevent its subsequent enforcement, and
Beneficiary is not obligated to collect anything hereunder, but is
accountable only for sums actually collected.
8.2 Further Assignments. Grantor shall give Beneficiary
at any time upon demand any further or additional forms of
assignment or transfer of such Rents, Leases and security as may be
reasonably requested by Beneficiary, and shall deliver to
Beneficiary executed copies of all such Leases and security.
8.3 Application of Rents. Beneficiary shall be entitled
to deduct and retain a just and reasonable compensation from monies
received hereunder for Beneficiary's services or that of
Beneficiary's agents in collecting such monies. Any monies
received by Beneficiary hereunder may be applied when received from
time to time in payment of any taxes, assessments or other liens
affecting the Property regardless of the delinquency thereof, such
application to be in such order as Beneficiary may determine. The
acceptance of this Deed of Trust by Beneficiary or the exercise of
any rights by Beneficiary hereunder shall not be, or be construed
to be, an affirmation by Beneficiary of any Lease or an assumption
of any liability under any Lease.
8.4 Collection of Rents. Upon or at any time after an
Event of Default shall have occurred and be continuing, Beneficiary
may declare all sums secured hereby immediately due and payable,
and may, at Beneficiary's option, without notice, and whether or
not the Secured Obligations shall have been declared due and
payable, either in person or by agent, with or without bringing any
action or proceeding, or by a receiver to be appointed by a court,
(i) enter upon, take possession of, manage and operate the
Property, or any part thereof, including without limitation making
repairs, alterations and improvements to the Property; (ii) make,
cancel, enforce or modify Leases; (iii) obtain and evict tenants;
(iv) fix or modify Rents; (v) do any acts which
Beneficiary deems reasonably proper to protect the security
thereof; and (vi) either with or without taking possession of the
Property, in Beneficiary's own name sue for or otherwise collect
and receive such Rents, including those past due and unpaid. In
connection with the foregoing, Beneficiary shall be entitled and
empowered to employ attorneys, and management, rental and other
agents in and about the Property and to effect the matters which
Beneficiary is empowered to do, and in the event Beneficiary shall
itself effect such matters, Beneficiary shall be entitled to charge
and receive management, rental and other fees therefor as may be
customary in the area in which the Property is located; and the
fees, charges, costs and expenses of Beneficiary or such persons
shall be additional Secured Obligations. Beneficiary may apply all
funds collected as aforesaid, less costs and expenses of operation
and collection, including reasonable attorneys' and agents' fees,
charges, costs and expenses, as aforesaid, upon any Secured
Obligations, and in such order as Beneficiary may determine. The
entering upon and taking possession of the Property, the collection
of such Rents and the application thereof as aforesaid shall not
cure or waive any default or waive, modify or affect notice of
default under the Note or this Deed of Trust or invalidate any act
done pursuant to such notice.
8.5 Authority of Beneficiary. Any tenants or occupants
of any part of the Property are hereby authorized to recognize the
claims of Beneficiary hereunder without investigating the reason
for any action taken by Beneficiary, or the validity or the amount
of Secured Obligations owing to Beneficiary, or the existence of
any default in the Note or this Deed of Trust, or under or by
reason of this assignment of Rents and Leases, or the application
to be made by Beneficiary of any amounts to be paid to Beneficiary.
The sole signature of Beneficiary shall be sufficient for the
exercise of any rights under this assignment and the sole receipt
of Beneficiary for any sums received shall be a full discharge and
release therefor to any such tenant or occupant on the Property.
Checks for all or any part of the rentals collected under this
assignment of Rents and Leases shall be drawn to the exclusive
order of Beneficiary.
8.6 Indemnification of Beneficiary. Nothing herein
contained shall be deemed to obligate Beneficiary to perform or
discharge any obligation, duty or liability of lessor under any
Lease of the Property, and Grantor shall and does hereby indemnify
and hold Beneficiary harmless from any and all liability, loss or
damage which Beneficiary may or might incur under any Lease of the
Property or by reason of this assignment except for liability, loss
or damage caused by Beneficiary's willful misconduct; and any and
all such liability, loss or damage incurred by Beneficiary,
together with the costs and expenses, including reasonable
attorneys' fees, incurred by Beneficiary in defense of any claims
or demands therefor (whether successful or not), shall be
additional Secured Obligations, and Grantor shall reimburse
Beneficiary therefor on demand.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Time of the Essence. Time is of the essence with
respect to all provisions of the Loan Documents.
9.2 Joint and Several Obligations. If Grantor is more
than one person or entity, then (a) all persons or entities
comprising Grantor are jointly and severally liable for all of the
Secured Obligations; (b) all representations, warranties, and
covenants made by Grantor shall be deemed representations,
warranties, and covenants of each of the persons or entities
comprising Grantor; (c) any breach, Default or Event of Default by
any of the persons or entities comprising Grantor hereunder shall
be deemed to be a breach, Default, or Event of Default of Grantor;
(d) any reference herein contained to the knowledge or awareness of
Grantor shall mean the knowledge or awareness of any of the persons
or entities comprising Grantor; and (e) any event creating personal
liability of any of the persons or entities comprising Grantor
shall create personal liability for all such persons or entities.
9.3 Waiver of Homestead and Other Exemptions. To the
extent permitted by law, Grantor hereby waives all rights to any
homestead or other exemption to which Grantor would otherwise be
entitled under any present or future constitutional, statutory, or
other provision of applicable state or federal law. Grantor hereby
waives any right it may have to require Beneficiary to marshall all
or any portion of the security for the Secured Obligations.
9.4 Nonrecourse. Except as otherwise
expressly hereinafter set forth, the recourse of Beneficiary with
respect to the obligations evidenced by the Note shall be solely to
the Property, Chattels and Intangible Personalty described herein.
Notwithstanding anything to the contrary contained in the Note or
in any other Loan Document, nothing shall be deemed in any way to
impair, limit or prejudice the rights of Beneficiary (a) in
foreclosure proceedings or in any ancillary proceedings brought to
facilitate Beneficiary's foreclosure on the Property or any portion
thereof; (b) to recover from Grantor damages or costs, including
without limitation reasonable attorneys' fees, incurred by
Beneficiary as a result of waste of the Property or Chattels by
Grantor; (c) to recover from Grantor any condemnation or insurance
proceeds attributable to the Property which were not paid to
Beneficiary or used to restore the Property in accordance with the
terms of this Deed of Trust or as otherwise agreed in writing; (d)
to recover from Grantor any rents, profits, security deposits,
advances, rebates, prepaid rents or other similar sums attributable
to the Property collected by or for Grantor following an Event of
Default under any Loan Document and not properly applied to the
reasonable fixed and operating expenses of the Property, including
payments of the Note and other sums due under the Loan Documents;
(e) to pursue the personal liability of Grantor under the provi-
sions of Sections 5.11 and 5.12 of this Deed of Trust, including
any indemnification provisions under such sections; (f) to exercise
any specific rights or remedies afforded Beneficiary under any
other provisions of the Loan Documents or by law or in equity or to
recover under any guarantee given in connection with the Note;
provided, however, that any personal liability of Grantor or any
General Partner shall be limited as otherwise set forth in the Note
or this Section 9.4; (g) to recover from Grantor the amount of any
accrued taxes, assessments, and/or utility charges affecting the
Property (whether or not the same have been billed) that are unpaid
by Grantor, or paid by Beneficiary under this Deed of Trust, and to
collect from Grantor any sums expended by Beneficiary in fulfilling
the obligations of Grantor, as lessor, under any Leases affecting
the Property; provided, however, that with respect to Grantor's
liability for accrued taxes, Grantor shall be credited with any
amounts escrowed by Grantor for payment of such taxes under
Section 4.4 hereof; and (h) to pursue any personal liability of
Grantor under the Environmental Indemnity Agreement executed by
Grantor in favor of Beneficiary of even date herewith. The
agreement contained in this Section 9.4 to limit the personal
liability of Grantor shall become null and void and be of no
further force and effect in the event (i) that the Property or any
part thereof or any interest therein, or any interest of Grantor,
shall be further encumbered by a voluntary lien securing any
obligation upon which Grantor, or any General Partner shall be
personally liable for repayment, whether as obligor or guarantor;
provided, however, that with respect to mechanic's or materialman's
liens, this subsection (i) shall not become operative until the
expiration of thirty (30) days after the date Grantor receives
written notice of such lien. During such thirty (30) days, Grantor
may attempt to cause any such lien to be released of record or, in
lieu thereof, furnish Beneficiary with a bond in form and with
sureties satisfactory to Beneficiary indemnifying Beneficiary
against any loss, cost, damages or expense arising in connection
with such lien; (ii) of any breach or violation of Sections 5.4,
5.5 or 5.7 of this Deed of Trust; (iii) of any fraud or material
misrepresentation by Grantor in connection with the Property, the
Loan Documents, or the application for the loan evidenced by the
Note; or (iv) Grantor acts outside the ordinary course of business
with respect to the Leases and such activity by Grantor causes a
loss to Beneficiary provided, however, that if Grantor operates the
Property as any other prudent operator of an apartment complex in
Garland, Texas would operate its property, no recourse liability to
Grantor shall arise under this subsection (iv). Notwithstanding the
foregoing to the contrary, (A) in no event shall any General
Partner have any personal liability for payment of the Additional
Premium (as defined in Section 1.24 hereof), (B) upon the
acceptance in writing by Beneficiary of (1) a cure by Grantor of a
breach or violation of Section 5.4, 5.5 or 5.7 of this Deed of
Trust, or (2) the removal of any encumbrance described in Section
9.4(i) of this Deed of Trust, which acceptance may be granted or
withheld in Beneficiary's sole discretion exercised in good faith,
the personal liability of Grantor for the obligations evidenced by
the Note incurred as a result of any such breach or violation of
Section 5.4, 5.5 or 5.7 or any such encumbrance described in
Section 9.4(i) shall terminate, and (C) in no event shall George
Krupp or Douglas Krupp be personally liable for the obligations
evidenced by the Note.
9.5 Rights and Remedies Cumulative. Beneficiary's
rights and remedies under each of the Loan Documents are cumulative
of the rights and remedies available to Beneficiary under each of
the other Loan Documents and those otherwise available to
Beneficiary at law or in equity. No act of Beneficiary shall be
construed as an election to proceed under any particular provision
of any Loan Document to the exclusion of any other provision in the
same or any other Loan Document, or as an election of remedies to
the exclusion of any other remedy which may then or thereafter be
available to Beneficiary.
9.6 No Implied Waivers. Beneficiary shall not be deemed
to have waived any provision of any Loan Document unless such
waiver is in writing and is signed by Beneficiary. Without
limiting the generality of the preceding sentence, neither
Beneficiary's acceptance of any payment with knowledge of a default
by Grantor, nor any failure by Beneficiary to exercise any remedy
following a default by Grantor shall be deemed a waiver of such
default, and no waiver by Beneficiary of any particular default on
the part of Grantor shall be deemed a waiver of any other default
or of any similar default in the future.
9.7 No Third Party Rights. No person shall be a third
party beneficiary of any provision of any of the Loan Documents.
All provisions of the Loan Documents favoring Beneficiary are
intended solely for the benefit of Beneficiary, and no third party
shall be entitled to assume or expect that Beneficiary will not
waive or consent to modification of any such provision in
Beneficiary's sole discretion.
9.8 Preservation of Liability and Priority. Without
affecting the liability of Grantor or of any other person, except
a person expressly released in writing, for payment and performance
of all of the Secured Obligations, and without affecting the rights
of Beneficiary with respect to any security not expressly released
in writing, and without impairing in any way the priority of this
Deed of Trust over the interests of any person acquired or first
evidenced by recording subsequent to the recording hereof,
Beneficiary may, either before or after the maturity of the Note,
and without notice or consent: (a) release any person liable for
payment or performance of all or any part of the Secured
Obligations; (b) make any agreement altering the terms of payment
or performance of all or any of the Secured Obligations; (c)
exercise or refrain from exercising, or waive, any right or remedy
which Beneficiary may have under any of the Loan Documents; (d)
accept additional security of any kind for any of the Secured
Obligations; or (e) release or otherwise deal with any real or
personal property securing the Secured Obligations. Any person
acquiring or recording evidence of any interest of any nature in
the Property, the Chattels, or the Intangible Personalty shall be
deemed, by acquiring such interest or recording any evidence
thereof, to have agreed and consented to any or all such actions by
Beneficiary.
9.9 Subrogation of Beneficiary. Beneficiary shall be
subrogated to the lien of any previous encumbrance discharged with
funds advanced by Beneficiary under the Loan Documents, regardless
of whether such previous encumbrance has been released of record.
9.10 Notices. Any notice required or permitted to be
given by Grantor or Beneficiary under this Deed of Trust shall be
in writing and will be deemed given (a) upon personal delivery, (b)
on the first business day after receipted delivery to a courier
service which guarantees next-business-day delivery, or (c) on the
third business day after mailing, by registered or certified United
States mail, postage prepaid, in any case to the appropriate party
at that party's address set forth below:
If to Grantor:
Windsor Partners Limited Partnership c/o The Berkshire Group
Harbor Plaza, 470 Atlantic Avenue Boston, Massachusetts 02210
Attention: General Counsel
<PAGE>
With a copy to:
Rebecca A. Baird, Esq.
Graves, Dougherty, Hearon & Moody
515 Congress Avenue, Suite 2300
Austin, Texas 78701
If to Beneficiary:
Sun Life Insurance Company of America
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director-Mortgage Lending and
Real Estate
With a copy to:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C. 950 Seventeenth
Street, Suite 1600 Denver, Colorado 80202 Attention: Henry I.
Lowe, Esq.
Either party may change such party's address for notices or copies
of notices by giving notice to the other party in accordance with
this Section 9.10.
9.11 Defeasance. Upon payment and performance in full of
all of the Secured Obligations, Beneficiary will execute and
deliver to Grantor such documents as may be required to reconvey
this Deed of Trust of record.
9.12 Illegality. If any provision of this Deed of Trust
is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Deed of Trust, the
legality, validity, and enforceability of the remaining provisions
of this Deed of Trust shall not be affected thereby, and in lieu of
each such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Deed of Trust a provision
as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
If the rights and liens created by this Deed of Trust shall be
invalid or unenforceable as to any part of the Secured Obligations,
then the unsecured portion of the Secured Obligations shall be
completely paid prior to the payment of the remaining and secured
portion of the Secured Obligations, and all payments made on the
Secured Obligations shall be considered to have been paid on and
applied first to the complete payment of the unsecured portion of
the Secured Obligations.
9.13 Usury Savings Clause. It is expressly stipulated and
agreed to be the intent of Beneficiary and Grantor at all times to
comply with the applicable law governing the highest lawful
interest rate. If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under
the Note or under any of the other Loan Documents, or contracted
for, charged, taken, reserved or received with respect to the loan
evidenced thereby, or if acceleration of the maturity of the Note,
any prepayment by Grantor, or any other circumstance whatsoever,
results in Grantor having paid any interest in excess of that
permitted by applicable law, then it is the express intent of
Grantor and Beneficiary that all excess amounts theretofore
collected by Beneficiary be credited on the principal balance of
the Note (or, at Beneficiary's option, paid over to Grantor), and
the provisions of the Note and other Loan Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called
for hereunder and thereunder. The right to accelerate maturity of
the Note does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration,
and Beneficiary does not intend to collect any unearned interest in
the event of acceleration. All sums paid or agreed to be paid to
Beneficiary for the use, forbearance or detention of the Secured
Obligations evidenced hereby or by the Note shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such Secured Obligations until
payment in full so that the rate or amount of interest on account
of such Secured Obligations does not exceed the maximum rate or
amount of interest permitted under applicable law. The term
"applicable law" as used herein shall mean any federal or state law
applicable to the loan made by Beneficiary to Grantor evidenced by
the Note.
9.14 Obligations Binding upon Grantor's Successors. This
Deed of Trust is binding upon Grantor and Grantor's successors and
assigns, and shall inure to the benefit of Beneficiary, and
Beneficiary's successors and assigns, and the provisions hereof
shall likewise be covenants running with the land. The duties,
covenants, conditions, obligations, and warranties of Grantor in
this Deed of Trust shall be joint and several obligations of
Grantor and Grantor's successors and assigns.
9.15 Attorneys' Fees. Any reference in this Deed of
Trust to attorneys' or counsels' fees paid or incurred by
Beneficiary shall be deemed to include paralegals' fees and legal
assistants' fees. Moreover, wherever provision is made herein for
payment of attorneys' or counsels' fees or expenses incurred by
Beneficiary, such provision shall include but not be limited to,
such fees or expenses incurred in any and all judicial, bankruptcy,
reorganization, administrative, or other proceedings, including
appellate proceedings, whether such fees or expenses arise before
proceedings are commenced, during such proceedings or after entry
of a final judgment.
9.16 Waiver and Agreement. GRANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO
PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PREPAYMENT
CHARGE, UPON ACCELERATION OF THE MATURITY DATE OF THE NOTE, AND
AGREES THAT, IF FOR ANY REASON A PREPAYMENT OF ALL OR ANY PART OF
THE NOTE IS MADE, WHETHER VOLUNTARILY OR FOLLOWING ANY ACCELERATION
OF THE MATURITY DATE OF THE NOTE BY BENEFICIARY FOR ANY REASON,
INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY PROHIBITED OR
RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE
PROPERTY OR ANY PART THEREOF SECURING THE NOTE, THEN GRANTOR SHALL
BE OBLIGATED TO PAY (EXCEPT AS OTHERWISE PROVIDED IN THIS DEED OF
TRUST), CONCURRENTLY WITH SUCH PREPAYMENT, EITHER (i) THE
PREPAYMENT PREMIUM PROVIDED FOR IN THE NOTE, OR, (ii) IN THE EVENT
OF ACCELERATION WHEN THE NOTE IS CLOSED TO PREPAYMENT, AS PROVIDED
IN SECTION 1.23 HEREOF. GRANTOR HEREBY DECLARES THAT BENEFICIARY'S
AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTE AT THE INTEREST
RATE AND FOR THE TERM SET FORTH IN THE NOTE CONSTITUTES ADEQUATE
CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY GRANTOR, FOR THIS WAIVER
AND AGREEMENT.
9.17 Substitute or Successor Trustee. Trustee may resign
by an instrument in writing addressed to Beneficiary, or Trustee
may be removed at any time with or without cause by an instrument
in writing executed by Beneficiary. In case of the death,
resignation, removal or disqualification of Trustee or if for any
reason Beneficiary shall deem it desirable to appoint a substitute
or successor trustee to act instead of the herein named Trustee or
any substitute or successor trustee, then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a
successor trustee, or a substitute trustee, without other formality
than appointment and designation in writing executed by
Beneficiary, and the authority hereby conferred shall extend to the
appointment of other successor and substitute trustees successively
until the Secured Obligations secured hereby have been paid in full
or until the Property is sold hereunder. Such appointment and
designation by Beneficiary shall be full evidence of the right and
authority to make the same and of all facts therein recited. If
Beneficiary is a corporation and such appointment is executed in
its behalf by an officer of such corporation, such appointment
shall be conclusively presumed to be executed with authority and
shall be valid and sufficient without proof of any action by the
board of directors or any superior officer of the corporation. Upon
the making of any such appointment and designation, all of the
estate and title of Trustee in the Property shall vest in the named
successor or substitute trustee and he shall thereupon succeed to
and shall hold, possess and execute all the rights, powers,
privileges, immunities and duties herein conferred upon Trustee;
but nevertheless, upon the written request of Beneficiary or of the
successor or substitute Trustee, the Trustee ceasing to act shall
execute and deliver an instrument transferring to such successor or
substitute Trustee all of the estate and title in the Property of
the Trustee so ceasing to act, together with all the rights,
powers, privileges, immunities and duties herein conferred upon
Trustee, and shall duly assign, transfer and deliver any of the
properties and moneys held by said Trustee hereunder to said
successor or substitute Trustee. All references herein to Trustee
shall be deemed to refer to the trustee (including any successor or
substitute appointed and designated as herein provided) from time
to time acting hereunder. Grantor hereby ratifies and confirms any
and all acts which the herein named Trustee or his successor or
successors, substitute or substitutes, in this trust, shall do
lawfully by virtue hereof.
9.18 Trial by Jury. GRANTOR AND BENEFICIARY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED ON THIS DEED OF TRUST, OR ARISING OUT OF, UNDER
OR IN CONNECTION WITH THE NOTE OR ANY LOAN DOCUMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR GRANTOR AND BENEFICIARY ENTERING INTO THE
LOAN TRANSACTION EVIDENCED BY THE NOTE.
9.19 Restatement. This Deed of Trust is an extension,
renewal, modification and restatement of that certain Multifamily
Deed of Trust, Assignment of Rents and Security Agreement dated
November 1, 1984, executed by Garland II Apartments Joint Venture
for the benefit of University Savings Association recorded in
Volume 84219, Page 0083 the Deed of Trust Records of Dallas County,
Texas.
9.20 Governing Laws. The substantive laws of the State of
Texas shall govern the validity, construction, enforcement, and
interpretation of this Deed of Trust.
9.21 Indemnity Provisions. GRANTOR HEREBY EXPRESSLY
RECOGNIZES THAT CONTAINED IN SECTIONS 4.4(c), 4.10, 5.11, 5.12,
7.1, 8.6 AND 9.4(e) OF THIS DEED OF TRUST ARE PROVISIONS WHICH
REQUIRE GRANTOR TO INDEMNIFY BENEFICIARY UNDER CERTAIN
CIRCUMSTANCES AND GRANTOR HEREBY ACKNOWLEDGES THAT BY EXECUTING
THIS DEED OF TRUST, GRANTOR ACCEPTS THESE PROVISIONS AND THE
OBLIGATIONS TO INDEMNIFY BENEFICIARY UNDER SUCH CIRCUMSTANCES.
9.22 Inconsistency. In the event of any inconsistency
between the terms of the Loan Documents and the terms of that
certain First Mortgage Loan Application dated December 7, 1993, as
amended, by and between Grantor and Beneficiary, the terms of the
Loan Documents shall govern and control in all respects.
IN WITNESS WHEREOF, Grantor has executed and
delivered this Deed of Trust as of the date first mentioned
above.
GRANTOR:
WINDSOR PARTNERS LIMITED
PARTNERSHIP, a Texas
limited partnership
By: ST Windsor
Corporation, a Texas
corporation, its
General Partner
By:
Name:
Title:
<PAGE>
STATE OF MASSACHUSETTS
COUNTY OF SUFFOLK
Before me, , a Notary Public, on this day
personally appeared , as of ST
Windsor Corporation, a Texas corporation, as general partner of
Windsor Partners Limited Partnership, a Texas limited
partnership, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me
that he executed the same for the purposes and consideration
therein expressed.
Given under my hand and official seal this 12th day of
April, 1994, A. D .
( SEAL)
Notary Public
<PAGE>
EXHIBIT A
(Description of Property)
BEING a tract or parcel of land out of the William Crittenton
Survey, Abstract No. 334, Dallas County, Texas and also being out
of Lot l-R, Block 1 of the Replat of Oakridge No. 5, an addition
to the City of Garland, Texas as recorded in Volume 83174. Page
101 of the Map Records of Dallas County, Texas and being more
particularly described as follows:
COMMENCING at an "x" cut in concrete at the intersection of the
West line of Shiloh road (a 100 foot right-of-way) with the South
line of Belt Line Road (a 100 foot right-of-way);
THENCE South 00 34'34" East along the West line of said Shiloh
Road a distance of 450.16 feet to a 1/2 inch iron rod found for
the POINT OF Beginning
THENCE 00 34'34" East continuing along the West line of said
Shiloh Road a distance of 300.09 feet to a 1/2 inch iron rod
found for corner in the North line of Oakridge No. 3, an addition
to the City of Garland, Texas as recorded in Volume 81145, Page
2474 of the Map Records of Dallas County, Texas;
THENCE North 89 13'16" West along the North line of said Oakridge
No. 3 a distance of 679.99 feet to the point of curvature of a
circular curve to the right with a radius of 1100.00 feet, a
central angle of 23 46'44", and a tangent of 231.59 feet;
THENCE along said curve in a westerly direction and continuing
along North line of said Oakridge No. 3, a distance of 456.52
feet to a 1/2 inch iron rod set for corner;
THENCE 67 00'00" West a distance of 80.88 feet continuing along
North line of said Oakridge No. 3 to an "x" cut in concrete in
the North line of Oakridge No. 4, an addition to the City of
Garland, Texas as recorded in Volume 83088, Page 0219 of Map
Records of Dallas County, Texas;
THENCE North 69 30'00" West along the North line of said Oakridge
No. 4 a distance inch iron rod found for corner said point being
in the east line of Tanglewood Apartments;
THENCE along the common line between Tanglewood Apartments and
Windsor Apartments North 00 46'44" East a distance of 436.72 feet
to a 1/2 inch iron rod found for corner;
THENCE South 89 13'16" East a distance of 350.00 feet to a 1/2
inch iron rod found for corner;
THENCE South 00 46'44" west a distance of 55.00 feet to a 1/2
inch iron rod set for corner;
THENCE South 89 13'l6" East a distance of 963.96 feet to the
POINT OF BEGINNING and containing 449,022 square feet or 10.3081
acres of land.
EXHIBIT A
to
DEED OF TRUST
(Legal Description)
Legal Description of land:
BEING a tract or parcel of land out of the William Crittenton
Survey, Abstract No. 334, Dallas County, Texas and also being out
of Lot l-R, Block 1 of the Replat of Oakridge No. 5, an addition
to the City of Garland, Texas as recorded in Volume 83174, Page
101 of the Map Records of Dallas County, Texas and being more
particularly described as follows:
COMMENCING at an "x" cut in concrete at the intersection of the
West line of Shiloh Road (a 100 foot right-of-way) with the South
line of Belt Line Road (a 100 foot right-of-way);
THENCE South 00 34'34" East along the West line of said Shiloh
Road a distance of 450.16 feet to a 1/2 inch iron rod found for
the POINT OF BEGINNING;
THENCE 00 34'34" East continuing along the West line of said
Shiloh Road a distance of 300.09 feet to a 1/2 inch iron rod
found for corner in the North line of Oakridge No. 3, an addition
to the City of Garland, Texas as recorded in Volume 81145, Page
2474 of the Map Records of Dallas County, Texas;
THENCE North 89 13'16" West along the North line of said Oakridge
No. 3 a distance of 679.99 feet to the point of curvature of a
circular curve to the right with a radius of 1100.00 feet, a
central angle of 23 46'44", and a tangent of 231.59 feet;
THENCE along said curve in a westerly direction and continuing
along North line of said Oakridge No. 3, a distance of 456.52
feet to a 1/2 inch iron rod set for corner;
THENCE 67 00'00" West a distance of 80.88 feet continuing along
North line of said oakridge No. 3 to an "x" cut in concrete in
the North line of Oakridge No. 4, an addition to the City of
Garland, Texas as recorded in Volume 83088, Page 0219 of Map
Records of Dallas County, Texas;
THENCE North 69 30'00" West along the North line of said Oakridge
No. 4 a distance of 131.23 feet to a 1/2 inch iron rod found for
corner said point being in the east line of Tanglewood
Apartments;
THENCE along the common line between Tanglewood Apartments and
Windsor Apartments North 00 46'44" East a distance of 436.72 feet
to a 1/2 inch iron rod found for corner;
THENCE South 89 13'16" East a distance of 350.00 feet to a 1/2
inch iron rod found for corner;
THENCE South 00 46'44" West a distance of 55.00 feet to a 1/2
inch iron rod set for corner;
THENCE South 89 13'16" East a distance of 963.96 feet to the
POINT OF BEGINNING and containing 449,022 square feet or 10.3081
acres of land.
<PAGE>
EXHIBIT B
to
DEED OF TRUST
(Permitted Exceptions)
1. Real property taxes for 1994 and subsequent years not yet due
and payable.
2. The following matters and all terms of the document creating
or offering evidence of the matters (we must insert matters or
delete this exception):
a. Sanitary sewer easement in favor of Southwest Belt Line-
Shiloh Associates, dated May 28, 1982, filed June 7, 1982,
recorded in Volume 82110 Page 3529 of the Deed Records of Dallas
County, Texas, and amended by instrument recorded in Volume 83006
Page 4596 of the Deed Records of Dallas County, Texas and as
shown on the plat recorded in Volume 83173 Page 101 of the Map
Records of Dallas County, Texas, and as shown on survey prepared
by Joseph C. Hersey, RPLS #1851, dated February 5, 1994.
b. Memorandum of Right of Way Agreement to Universal Cable
Services filed March 31, 1985, recorded in Volume 85149 Page 3756
of the Deed Records of Dallas County, Texas,
c. Rights of tenants and/or lessees in possession, as tenants or
leesees only, under any unrecorded leases and/or rental
agreements.
d. Fifteen foot (15') utility easements as shown on plat
recorded in Volume 83174, page 101, Map Records, Dallas County,
Texas, and as shown on survey prepared by Joseph C. Hersey, RPLS
#1851, dated February 5, 1994.
e. Twenty foot (20') utility easements as shown on plat recorded
in Volume 83174, Page 101, Map Records, Dallas County, Texas, and
as shown on survey prepared by Joseph C. Hersey, RPLS #1851,
dated February 5, 1994.
f. Thirty-five foot (35') utility easements as shown on plat
recorded in Volume 83174, Page 101, Map Records, Dallas County,
Texas, and as shown on survey prepared by Joseph C. Hersey, RPLS
#1851, dated February 5, 1994.
3. Financing Statement filed May 29, 1992, recorded in Volume
92105, page 4611 of the Deed of Trust Records, Dallas County,
Texas, executed by Krupp Asset Management, as Debtor, and Lone
Star Alarms systems, Inc., as Secured Party(ies).
