<PAGE>
FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-18419
BRUNNER COMPANIES INCOME PROPERTIES L.P. III
(Exact name of small business issuer as specified in its charter)
Delaware 31-1266850
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
BALANCE SHEET
(Unaudited)
June 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash:
Unrestricted $ 840,952
Restricted-tenant security deposits 3,993
Accounts receivable 170,803
Escrows for taxes and insurance 64,500
Other assets 189,074
Investment properties:
Land $ 2,336,469
Buildings and related personal
property 18,329,225
20,665,694
Less accumulated depreciation (3,551,891) 17,113,803
$18,383,125
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 10,063
Tenant security deposits 4,993
Accrued taxes 80,969
Other liabilities 69,186
Mortgage notes payable (Note C) 17,499,332
Partners' Capital (Deficit)
General partner $ (53,255)
Class A Limited Partners - 850,900
units 747,855
Class B Limited Partners - 8,600 units 23,982 718,582
$18,383,125
</TABLE>
See Accompanying Notes to Financial Statements
1
<PAGE>
b) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $542,690 $ 679,485 $1,082,187 $1,385,215
Other income 20,332 8,107 30,541 15,331
Total revenues 563,022 687,592 1,112,728 1,400,546
Expenses:
Operating 41,260 84,195 98,440 191,515
General and administrative 30,022 30,277 61,946 58,913
Property management fees 17,083 32,811 35,536 62,296
Depreciation 149,176 190,281 298,352 403,500
Amortization 3,558 4,140 7,038 7,458
Interest 407,114 573,225 817,077 1,144,782
Property taxes 40,487 55,728 81,142 106,588
Write-down of property
(Note D) -- -- 414,859 --
Tenant reimbursements (66,381) (89,511) (133,144) (184,414)
Total expenses 622,319 881,146 1,681,246 1,790,638
Gain on foreclosure (Note D) -- -- 844,287 --
Net (loss) income $(59,297) $(193,554) $ 275,769 $ (390,092)
Net (loss) income allocated
to general partner (1%) $ (593) $ (1,936) $ 2,758 $ (3,901)
Net (loss) income allocated
to Class A limited
partners (98.01%) (58,117) (189,702) 270,281 (382,329)
Net (loss) income allocated
to Class B limited
Partners (.99%) (587) (1,916) 2,730 (3,862)
$(59,297) $(193,554) $ 275,769 $ (390,092)
Net (loss) income per limited
partnership unit $ (.07) $ (.22) $ .32 $ (.45)
Class A limited partnership
units outstanding 850,900 851,400 850,900 851,400
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
c) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partner Class A Class B Total
<S> <C> <C> <C> <C>
Original capital contributions 1,000 $8,420,170 $86,000 $8,507,170
Partners' capital (deficit) at
December 31, 1994 $(56,013) $ 477,574 $21,252 $ 442,813
Net income for the six months
ended June 30, 1995 2,758 270,281 2,730 275,769
Partners' capital (deficit)
at June 30, 1995 $(53,255) $ 747,855 $23,982 $ 718,582
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
d) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
<S> <C> <C>
1995 1994
Cash flows from operating activities:
Net income (loss) $ 275,769 $ (390,092)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation 298,352 403,500
Gain on foreclosure (844,287) --
Write-down of property 414,859 --
Amortization of organizational costs,
loan costs and leasing commissions 14,000 9,124
Change in accounts:
Restricted cash 4,786 (3,779)
Accounts receivable (2,897) (12,365)
Escrows for taxes and insurance 64,255 (10,640)
Other assets (36,920) (67,041)
Accounts payable (9,021) (2,492)
Tenant security deposit liabilities (3,786) 6,414
Accrued taxes (26,887) (54,698)
Other liabilities 58,291 (55,711)
Net cash provided by (used in)
operating activities 206,514 (177,780)
Cash flows from investing activities:
Property improvements and replacements -- (1,266)
Net cash used in
investing activities -- (1,266)
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
BRUNNER COMPANIES INCOME PROPERTIES L.P. III
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
<S> <C> <C>
1995 1994
Cash flows from financing activities:
Loan extension costs $ (81,836) $ --
Payment on mortgage notes payable (16,668) --
Net cash used in financing
activities (98,504) --
Net increase (decrease) in cash 108,010 (179,046)
Cash at beginning of period 732,942 696,137
Cash at end of period $ 840,952 $ 517,091
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 810,115 $1,198,615
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE>
BRUNNER COMPANIES INCOME PROPERTIES L.P. III
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Foreclosure
During the six months ended June 30, 1995, Forest Ridge Shopping
Center was foreclosed upon by the lender. In connection with this
foreclosure, the following balance sheet accounts were adjusted by the
non-cash amounts noted below.
<TABLE>
<CAPTION>
1995
<S> <C> <C>
Accounts receivable $ (25,405)
Other assets (31,509)
Investment properties (6,423,410)
Accrued taxes 66,643
Other liabilities 57,968
Mortgage notes payable 7,200,000
</TABLE>
See Accompanying Notes to Financial Statements
6
<PAGE>
e) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership had cash
flows provided by operating activities of $206,514 for the six months
ended June 30, 1995 and $60,143 for the twelve months ended December 31,
1994. At June 30, 1995, the Partnership had unrestricted cash of
$840,952. As discussed in Note C, a mortgage note payable of $5,300,000
that matured January 1, 1994, is in default. The Partnership's estimated
operating cash flows during 1995 are expected to be inadequate to
enable the Partnership to make this payment on its long-term debt.
Throughout 1994 and the second quarter of 1995 the Partnership has
sought refinancing for the Partnership's debt. The Partnership has been
unsuccessful in refinancing the debt on Bay Village and Forest Ridge.
Accordingly, Forest Ridge was foreclosed on January 5, 1995, (see Note
D) and it is expected that Bay Village will be either sold or foreclosed
by the lender in 1995. A long-term extension related to Highpoint and
Gateway Plaza has been obtained to extend the maturity dates to the year
2008 (see Note C).
Note B - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the
Managing General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods
ended June 30, 1995, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1995. For
further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for
the fiscal year ended December 31, 1994.
Reclassifications
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
7
<PAGE>
Note C - Mortgage Notes Payable
The Partnership's mortgage notes payable for Bay Village ($5,300,000)
and Forest Ridge ($7,200,000) matured on January 1, 1994, and the
mortgage notes payable for Highpoint ($6,600,000) and Gateway
($5,616,000) matured on March 1, 1995. The Partnership has been
unsuccessful in refinancing the debt on Bay Village and Forest Ridge.
Accordingly, Forest Ridge was foreclosed on by the lender on January 5,
1995 (see Note D) and it is expected that Bay Village will either be
sold or foreclosed by the lender in 1995. The Partnership has
successfully obtained a long-term extension related to the Highpoint and
Gateway notes. The Highpoint note matures October 1, 2008, and the
Gateway note matures January 1, 2008. Both notes are cross-
collateralized and have an interest rate of 9.25%. Loan costs of
$81,836 were paid relating to the extension of these notes.
Note D - Foreclosure of Forest Ridge
On January 5, 1995, the lender foreclosed on Forest Ridge Shopping
Center. The $7,200,000 mortgage matured January 1, 1994, and was in
default. The lender granted forebearances through June 30, 1994, while
refinancing discussions continued between the Partnership and the
lender. These discussions did not ultimately produce an agreement to
either refinance or sell the property and the Partnership did not
contest the lender's foreclosure. In the Managing General Partner's
opinion, it was not in the Partnership's best interest to contest the
foreclosure action or file for reorganization under the bankruptcy laws.
On January 5, 1995, the Partnership recorded a valuation write-down of
$414,859, to reduce the carrying costs of the Forest Ridge assets to
their estimated market value, and a gain on the foreclosure of $844,287.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three retail
centers. The following table sets forth the average occupancy of the
properties for the quarters ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Average Occupancy
1995 1994
<S> <C> <C>
Bay Village
Conway, South Carolina 98% 98%
Gateway Plaza
Mt. Sterling, Kentucky 94% 89%
Highpoint Village
Bellefontaine, Ohio 95% 93%
</TABLE>
The increase in occupancy at Gateway Plaza is a result of six new
tenants moving in during 1994 that occupy approximately 9,400 square
feet. The Managing General Partner has been notified by an anchor
tenant, Wal-Mart, of its intent to vacate the Gateway Plaza in 1996.
This tenant is liable for, and the Partnership expects that it will pay,
its rental payments through the year 2008 when its lease expires. It is
unknown at this time to what extent this vacancy will negatively impact
the performance of the shopping center.
The Partnership realized net income of $275,769 for the six months
ended June 30, 1995, compared to a net loss of $390,092 for the
corresponding period in 1994. A net loss of $59,297 was recorded for
the three months ended June 30, 1995, compared to a net loss of $193,554
for the corresponding period in 1994. The increase in net income for
the six months ended June 30, 1995, compared to the corresponding period
in 1994 was primarily due to an $844,287 gain on the foreclosure of
Forest Ridge. The gain on the Forest Ridge foreclosure was partially
offset by a related $414,859 write-down to reduce the carrying costs of
the Forest Ridge assets to their estimated market value. In addition,
the decreases in rental income, operating expenses, property management
fees, depreciation, interest expense, property taxes, and tenant
reimbursements were primarily a result of the foreclosure of Forest
Ridge. Other income increased for the three and six month periods ended
June 30, 1995, as a result of an easement fee paid by Wal-Mart at
Gateway Plaza.
At June 30, 1995, the Partnership had unrestricted cash of
$840,952 versus $732,942 at December 31, 1994. Net cash provided by
operating activities increased as a result of a decrease in tax and
insurance escrow funding and a decrease in payments of other
liabilities. Net cash used in financing activities increased due to the
payment of loan costs relating to the extension on the Highpoint and
Gateway mortgage notes and principal payments.
9
<PAGE>
Due to the uncertainty of the mortgage financing for the
Partnership, the Managing General Partner is attempting to maximize cash
reserves. No distributions were made in 1994 or the first six months of
1995 and no distributions are anticipated during the remainder of 1995.
Future cash distributions will depend on the levels of net cash
generated from operations, refinancing, property sales, and the
availability of cash reserves.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - See exhibit index contained herein.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1995.
11
<PAGE>
EXHIBIT INDEX
EXHIBIT NO.
10.111 Amended and Restated Promissory Note dated as of May 30,
1995, for Gateway Plaza by and among Commonwealth Life
Insurance Company, a Kentucky Corporation and Brunner
Companies Income Properties L.P. III, a Delaware limited
partnership.
10.112 Amended and Restated Promissory Note dated as of May 30,
1995, for Highpoint Village by and among National Home Life
Assurance Company, a Missouri Corporation and Brunner
Companies Income Properties L.P. III, a Delaware limited
partnership.
27 Financial Data Schedule.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRUNNER COMPANIES INCOME PROPERTIES L. P. III,
a Delaware limited partnership
By: Brunner Management Limited
Partnership, an Ohio limited Partnership, its
General Partner
By: 104 Management, Inc., an Ohio corporation,
its Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: August 10, 1995
13
AMENDED AND RESTATED PROMISSORY NOTE
$5,616,000.00 Dated: May 30, 1995
FOR VALUE RECEIVED, the undersigned, BRUNNER COMPANIES
INCOME PROPERTIES, L.P. III, a Delaware limited partnership (hereafter
referred to as "Borrower") promises to pay to the order of
COMMONWEALTH LIFE INSURANCE COMPANY, a Kentucky corporation
(hereafter referred to as "Payee"; Payee and/or any subsequent
holder(s) hereof, hereafter referred to as "Holder"), at Payee's address
c/o Providian Capital Management Real Estate Services, Section #808,
Louisville, Kentucky 40289, or at such other place as Holder shall
designate from time to time in writing, the principal sum of FIVE
MILLION SIX HUNDRED SIXTEEN THOUSAND AND NO/100 DOLLARS
($5,616,000.00), together with interest on the unpaid principal
balance of such indebtedness from time to time outstanding from the
date of disbursement at the rates hereinafter set forth, in lawful
money of the United States of America, such principal and interest
being due and payable as follows:
1. INTEREST AND PAYMENTS.
A. Interest Rate. Interest shall accrue on the
outstanding principal amount hereof at the rate of nine and
one-quarter percent (9.25%) per annum commencing on the date of this
Note (hereafter referred to as the "Closing") to and including the Final
Maturity Date (hereafter defined).
B. Payment Terms.
[1] Interest for the calendar month in which the
Closing takes place shall be prorated on a daily basis as
provided in Subparagraph 1D hereof and shall be paid in
advance at Closing. Thereafter, principal and interest shall
be payable in equal monthly installments of Fifty Thousand
Eight Hundred Thirty-Three and 33/100 Dollars ($50,833.33), such
installments to be due on the first day of each calendar month
during the term hereof, commencing on the first day of the second
full calendar month following the Closing.
[2] The entire outstanding principal balance
of the indebtedness evidenced hereby, plus all accrued but
unpaid interest thereon, shall be due and payable on January 1,
2008 (hereafter referred to as "Final Maturity Date").
Borrower acknowledges that monthly installments of principal and
interest required in Subparagraph B1 above are based on an
amortization period that is longer than the term of this Note,
and therefore a substantial portion of the principal balance of
this Note will be due on the Final Maturity Date.
C. Basis Point. As used in this Note, the term "Basis
Point" shall mean one one-hundredth (1/100th) of one percentage point of
interest.
D. Calculation of Interest. All interest on any
indebtedness evidenced by this Note shall be calculated on the basis
of a three hundred sixty (360)-day year composed of twelve (12) thirty
(30)-day months. Interest for partial months shall be calculated by
multiplying the principal balance of this Note by the applicable per
annum rate, dividing the product so obtained by 360, and multiplying the
result by the actual number of days elapsed.
2. APPLICATION OF PAYMENTS. All payments made under this Note
shall be applied first in reduction of any late charges, next in
reduction of any sums advanced by Holder to cure defaults under the
Mortgage (defined below), next in reduction of any applicable
prepayment premium, next in reduction of current interest, and any
remaining amount in reduction of the outstanding principal balance.
3. COLLATERAL. The indebtedness evidenced by this Note is
secured by,
<PAGE>
among other things: [i] that certain Mortgage,
Assignment of Rents and Security Agreement dated as of May 12, 1989,
between Tennessee & Associates-IV (Mt. Sterling), an Ohio general
partnership, as mortgagor, and Payee, as mortgagee, recorded in
Mortgage Book 129, Page 218 in the Montgomery County, Kentucky Clerk's
Office, the obligations of the mortgagor thereunder having been
assumed by Borrower pursuant to that certain Loan Extension Agreement
dated as of July 15, 1994, recorded in Mortgage Book 159, Page 249
in the aforesaid Clerk's Office, as further amended by First Amendment
to Mortgage, Assignment of Rents and Security Agreement of even
date herewith between Borrower and Payee recorded or to be recorded in
the aforesaid Clerk's Office (as so amended, the "Mortgage"),
conveying Borrower's right, title and interest in property lying
and being in Montgomery County, Kentucky as the same is more
particularly described in the Mortgage, to Payee as security for the
performance by Borrower of its obligations hereunder; [ii] an
Assignment of Leases and Rents dated as of May 12, 1989, between
Tennessee & Associates- IV (Mt. Sterling), an Ohio general
partnership, and Payee, recorded in Miscellaneous Book 43, Page 55
in the Montgomery County, Kentucky Clerk's Office, the obligations of
the assignor thereunder having been assumed by Borrower pursuant to
that certain Loan Extension Agreement dated as of July 15, 1994,
recorded in Mortgage Book 159, Page 249 in the aforesaid Clerk's
Office, as further amended by First Amendment to Assignment of Leases
and Rents of even date herewith recorded or to be recorded in the
aforesaid Clerk's Office (as so amended, the "Assignment of Rents");
[iii] that certain Second Open-End Mortgage, Assignment of Rents and
Security Agreement dated as of the date hereof between Borrower, as
Mortgagor, and Payee, as Mortgagee, to be recorded in the Logan
County, Ohio records, conveying Borrower's right, title and interest in
the property in Logan County, Ohio commonly known as the Highpoint
Plaza Shopping Center (the "Second Mortgage"); [iv] any cash
deposit, certificate of deposit or letter of credit given as security
for the indebtedness now evidenced by this Note; and [v] any other
document executed in connection with the indebtedness now
evidenced by this Note or the "Existing Note" (hereinafter
described). All of the property and other interests of the
Borrower encumbered by or subject to the terms of the Mortgage or
any other Loan Document (defined below) is hereafter referred to as the
"Property."
4. LATE CHARGE. Borrower shall pay to Holder a late charge
equal to four percent (4%) of any amount, including any interest, not
paid within five (5) days of the due date of such amount without
regard to the grace period provided in Paragraph 5 below, not as a
penalty, but as compensation to Holder for the cost of collecting and
processing such late payment. Borrower agrees that such late charge
represents a good faith reasonable estimate of the probable cost to
Holder of such delinquency. Holder shall have no obligation to accept
any late payment not accompanied by said late charge, but if Holder does
so, Holder shall not thereby waive its right to the late charge.
5. INTEREST UPON DEFAULT; ACCELERATION. In the event
that any payment of principal, interest, late charge or prepayment
premium under this Note is not paid within ten (10) days of its
due date, whether or not by reason of acceleration, such failure shall
constitute a default hereunder, and such amount shall bear interest
from the due date thereof until paid (including interest on any
judgment obtained by Holder until payment in full is received by
Holder) at the per annum rate which is three hundred (300) Basis
Points above the interest rate otherwise in effect hereunder. In the
event of such failure to pay, and/or if there occurs a default
under the Mortgage, the Assignment of Leases and Rents, the
Second Mortgage, the Environmental Indemnity Agreement of even date
herewith executed by Borrower in favor of Holder (the "Environmental
Indemnity Agreement"), or in or under any other document or instrument
evidencing, securing, or otherwise relating to the indebtedness
evidenced hereby (this Note, the Mortgage, the Assignment of Leases
and Rents, the Second Mortgage, the Environmental Indemnity
Agreement, and such other documents and instruments are collectively
referred to as "Loan Documents", and all of the terms and conditions
thereof are hereby made a part of this Note to the same extent and with
the same force and
2
<PAGE>
effect as if they were fully set forth herein), which
default is not cured within the applicable notice and/or grace
period, if any, expressly provided therefor, Holder may at its option,
in addition to any other remedies to which it may be entitled, declare
the total unpaid principal balance of the indebtedness evidenced
hereby, together with all accrued but unpaid interest thereon and any
applicable prepayment premium and all other sums owing, immediately
due and payable.
6. PREPAYMENT; PREPAYMENT PREMIUM. Borrower may
prepay the indebtedness evidenced by this Note in whole or in part, at
any time and from time to time, without the payment of a prepayment
premium or penalty, provided [i] written notice of the amount of
such prepayment is given to Holder at least ninety (90) days prior
to any such prepayment, [ii] any partial prepayment must be in
multiples of $10,000, and [iii] no partial prepayment shall entitle
Borrower to the release of any collateral securing this Note. All
partial prepayments shall be applied in the manner provided in Paragraph
2 above.
7. ATTORNEYS' FEES. If this Note is placed in the hands
of an attorney for collection or is collected through any legal or
administrative proceeding, including without limitation bankruptcy or
insolvency proceedings, or if Holder shall engage counsel in any
matters relating to a default in the performance of obligations to
Holder under this Note, or any of the Loan Documents, Borrower
promises to pay, in addition to costs and disbursements otherwise
allowed, to the extent permitted by law, reasonable attorneys' fees,
including fees incurred for trial and appellate proceedings.
8. WAIVER. Borrower hereby waives presentment for payment,
demand, protest, notice of nonpayment, demand, default, dishonor, and
protest.
9. FORBEARANCE. Holder shall not be deemed to have waived
any of Holder's rights or remedies under this Note unless such waiver
is express and in a writing signed by Holder, and no delay or
omission by Holder in exercising, or failure by Holder on any one or
more occasions to exercise, any of Holder's rights hereunder or
under the Loan Documents, or at law or in equity, including, without
limitation, Holder's right, after any default by Borrower, to declare
the entire indebtedness evidenced hereby immediately due and payable,
shall be construed as a novation of this Note or shall operate as a
waiver or prevent the subsequent exercise of any or all of such
rights. Acceptance by Holder of any portion or all of any sum
payable hereunder whether before, on or after the due date of such
payment, shall not be a waiver of Holder's right either to require
prompt payment when due of all other sums payable hereunder or to
exercise any of Holder's rights, powers and remedies hereunder or under
the Loan Documents. A waiver of any right on one occasion shall not
be construed as a waiver of Holder's right to insist thereafter
upon strict compliance with the terms hereof without previous
notice of such intention being given to Borrower, and no exercise of any
right by Holder shall constitute or be deemed to constitute an election
of remedies by Holder precluding the subsequent exercise by Holder of
any or all of the rights, powers and remedies available to it
hereunder, under any of the other Loan Documents, or at law or in
equity. Borrower expressly waives the benefit of any statute or rule
of law or equity now provided, or which may hereafter be provided,
which would produce a result contrary to, or in conflict with, the
foregoing. Borrower consents to any and all renewals and extensions
in the time of payment hereof without in any way affecting the
liability of Borrower or any person liable or to become liable
with respect to any indebtedness evidenced hereby. No extension of
the time for the payment of this Note or any installment due hereunder,
made by agreement with any person now or hereafter liable for the
payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this Note,
either in whole or in part, unless Holder agrees otherwise in
writing.
3
<PAGE>
10. RENUNCIATION AND ASSIGNMENT OF EXEMPTIONS. Borrower
hereby waives and renounces for itself, its legal representatives,
successors and assigns, all rights to the benefits of any statute
of limitations and any moratorium, reinstatement, marshalling,
forbearance, valuation, stay, extension, redemption,
appraisement, exemption, and homestead right, entitlement, or
exemption now provided, or which may hereafter be provided, by the
Constitution or laws of the United States of America or of any
state thereof, both as to itself and in and to all of its
property, real and personal, against the enforcement and collection of
the obligations evidenced by this Note. Borrower hereby transfers,
conveys and assigns to Holder a sufficient amount of such homestead
right, entitlement, or exemption as may be set apart in bankruptcy,
to pay this Note in full, with all costs of collection, and does
hereby direct any trustee in bankruptcy having possession of such
homestead right, entitlement, or exemption to deliver to Holder a
sufficient amount of property or money set apart as exempt to
pay the indebtedness evidenced hereby, or any renewal thereof, and does
hereby appoint Holder the attorney-in-fact for Borrower to claim any and
all homestead right, entitlement, or other exemptions allowed by law.
11. APPLICABLE LAW. This Note shall be governed by, enforced
under and interpreted in accordance with the laws of the State of
Kentucky without giving effect to applicable principles of conflict of
laws to the extent that the application of the law of another
jurisdiction would be required thereby.
12. LIMIT ON INTEREST. If, from any circumstances
whatsoever, fulfillment of any provision of this Note, at the time
performance of such provision shall be due, shall involve
transcending the limit on interest presently prescribed by any
applicable usury statute or any other applicable law, with regard to
obligations of like character and amount, then Holder may at its option
[i] declare the entire indebtedness evidenced hereby, including
interest, and all other sums owing, immediately due and payable, [ii]
reduce the obligations to be fulfilled to such limit on interest, or
[iii] apply the amount that would exceed such limit on interest
to the reduction of the outstanding principal balance of this Note,
and not to the payment of interest, with the same force and effect
as though Borrower had specifically designated such sums to be so
applied to principal and Holder had agreed to accept such extra
payment(s) as a premium-free prepayment, so that in no event shall any
exaction be possible under this Note that is in excess of the
applicable limit on interest. It is the intention of Borrower and
Holder not to create any obligation in excess of the amount allowable
by applicable law. The provisions of this paragraph shall control
every other provision of this Note.
13. NOTICES. All notices, demands or requests provided
for or permitted to be given hereunder, same shall be in writing
and shall be delivered in person or sent by registered or certified
United States mail, postage prepaid, return receipt requested, or by
overnight courier, to the addresses set out below or to such other
addresses as are specified by no less than ten (10) days prior written
notice delivered in accordance herewith:
If to Borrower: Brunner Companies Income Properties,
L.P. III
c/o Asset Management Department
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
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If to Holder: Commonwealth Life Insurance Company
c/o Providian Capital Management Real
Estate Services
Asset Management Department, 12th Floor
P.O. Box 32830
Louisville, Kentucky 40232
All such notices, demands and requests shall be deemed effectively
given and delivered three (3) days after the postmark date of
mailing, the day after delivery to the overnight courier, or, if
delivered personally, when received. Rejection or other refusal to
accept or the inability to deliver because of a changed address of
which no notice was given in accordance with the time period provided
herein, shall be deemed to be receipt of the notice, demand or request
sent.
14. LIMITED EXCULPATION. Subject to the provisions of any
guaranties of the indebtedness created or arising under any of the
Loan Documents, but notwithstanding anything else to the contrary in
this Note or in any of the other Loan Documents, in any action or
proceeding brought to enforce the obligation of Borrower to pay any
indebtedness or obligation evidenced by, created or arising under this
Note or the Loan Documents or any of them, or to exercise any right
of foreclosure or power of sale contained in the Loan Documents of
the liens, security titles, estates, assignments, rights and security
interests now or at any time hereafter securing any indebtedness or
obligation pursuant to the Loan Documents, the judgment or decree
shall be enforceable against Borrower only to the extent of the interest
of Borrower in the Property, and any such judgment shall not be subject
to the execution on, nor be a lien on, any assets of Borrower
other than its interest in such Property, it being specifically
understood and agreed that Borrower shall have no personal liability
hereunder for the payment of this Note, and Holder shall look only to
the Property and any guaranties of this Note for the payment of the
indebtedness evidenced hereby; PROVIDED, HOWEVER that, notwithstanding
the foregoing provisions of this paragraph, Borrower shall be fully and
personally liable at all times for: [a] any costs, expenses, or
liability, including attorneys' fees, incurred by Holder arising from
any order, consent decree or settlement relating to the clean-up of
toxic or Hazardous Materials or waste products (as the same are
defined in the Mortgage); [b] repayment of the entire unpaid balance
of this Note in the event of fraud or material
misrepresentations; and [c] the misapplication of [i] proceeds paid
under any insurance policies by reason of damage, loss or
destruction to all or any portion of the Property, to the full extent of
such proceeds, [ii] proceeds or awards resulting from the condemnation
or other taking in lieu of condemnation of all or any portion of the
Property, to the full extent of such proceeds or awards, and [iii] from
and after default, income, rents, issues, profits, and revenues
(collectively referred to as "rents") arising or issuing from or out of
all or any part of the Property to the full extent of such rents.
Nothing contained in this paragraph shall [x] be deemed to be a release
or impairment of the indebtedness evidenced by this Note or the lien
of the Loan Documents upon the Property; [y] preclude Holder in
the case of any default from foreclosing the Loan Documents or
exercising any power of sale contained in the Loan Documents, or
except as expressly limited in this paragraph, from enforcing any of
the other rights of Holder; or [z] preclude Holder from enforcing its
rights under any guaranties of the indebtedness, pursuant to the terms
of such guaranties.
15. TIME IS OF ESSENCE. TIME IS OF THE ESSENCE in complying
with all of the terms, provisions and conditions of this Note.
16. AMENDMENT. This Note may not be waived, changed,
modified or discharged orally, except by an agreement in writing
signed by the party against whom the enforcement of waiver, change,
modification or discharge is sought.
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17. BORROWER. The term "Borrower" as used herein shall
include the maker(s) of this Note and all person(s) or entity(ies) now
or hereafter liable with respect to this Note, whether as maker,
principal, surety, guarantor, endorser or otherwise, each of whom shall
be jointly and severally liable for all of the obligations of the
maker(s) hereunder.
18. SEPARATE ACTIONS. Each installment of principal and
interest owing on this Note may be recovered in a separate action, or in
the event that Holder accelerates the maturity of this Note
pursuant to Holder's options hereunder or under any of the other Loan
Documents, all sums becoming due and payable pursuant to such
acceleration may be recovered in a single action. Holder, or any
person claiming by, through, or under Holder, shall have the absolute
right to seek one or more money judgments in each such cause of
action based on this Note.
19. GENDER. The singular shall include the plural and vice
versa. The obligations and liabilities hereunder are joint and several
and shall be binding upon the heirs, successors, legal
representatives, endorsers and assigns of the parties hereof.
20. PROHIBITED OR UNENFORCEABLE CLAUSE. If any provision of
this Note is found by a court of competent jurisdiction to be
prohibited or unenforceable, it shall be ineffective only to the
extent of such prohibition or unenforceability and such prohibition
or unenforceability shall not invalidate the balance of such
provision to the extent it is not prohibited or unenforceable, nor
invalidate the other provisions hereof, all of which shall be liberally
construed in favor of Holder in order to effect the provisions of this
Note.
21. GENERAL PARTNERS. Borrower represents and warrants
that the undersigned constitute all of the general partners of the
Borrower.
22. HEADINGS. The underlined words appearing at the
commencement of the paragraphs are included only as a guide to the
contents thereof and are not to be considered as controlling,
enlarging or restructuring the language or meaning of those paragraphs.
23. CROSS-DEFAULT. Holder's affiliated company, National
Home Life Assurance Company ("National Home Life") is the holder of a
certain amended and restated promissory note dated as of the date
of this Note made by Borrower to the order of National Home Life
in the principal amount of $6,600,000 (the "Related Note"). A default
under or breach of any of the terms or provisions (following any
applicable grace or cure period, if any, expressly provided therein) of
[i] the Related Note, [ii] that certain Open- End Mortgage, Assignment
of Rents and Security Agreement dated as of May 12, 1989, recorded in
Official Record Volume 93, Page 228 in the Logan County, Ohio records,
as amended by Loan Extension Agreement dated as of July 15, 1994,
recorded in Official Record Volume 233, Page 830 in the Logan County,
Ohio records, as further amended by First Amendment to Open-End
Mortgage, Assignment of Rents and Security Agreement dated as of
the date of this Agreement and recorded in the Logan County, Ohio
records (as so amended, the "Related Mortgage"), [iii] that certain
Assignment of Leases and Rents dated as of May 12, 1989, recorded in
Official Record Volume 93, Page 293 in the Logan County, Ohio records,
as amended by Loan Extension Agreement dated as of July 15, 1994,
recorded in Official Record Volume 233, Page 830 in the Logan County,
Ohio records, as further amended by First Amendment to Assignment of
Leases and Rents dated as of the date of this Agreement and recorded
in the Logan County, Ohio records (as so amended, the "Related
Assignment of Rents"), or [iv] any other instrument or document
securing and/or pertaining to the loan now evidenced by the Related Note
(the "Related Loan") (the Related Note, the Related Mortgage, the
Related Assignment of Rents, and all such other instruments and
documents securing and/or pertaining to the Related Loan are sometimes
collectively referred to herein as the "Related Loan Documents"),
shall constitute a default under this Note, the Mortgage, the
Assignment of Rents and the other Loan Documents; and Payee may
accelerate the
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indebtedness evidenced by this Note, foreclose the Mortgage, foreclose
the Second Mortgage, and/or exercise all other rights and remedies of
Payee upon Borrower's default under the Loan Documents or otherwise
available to a mortgagee or secured party under applicable law.
24. NO NOVATION. This Note evidences the principal
indebtedness of $5,616,000.00 remaining unpaid on, and heretofore
evidenced by, that certain promissory note dated May 12, 1989, made
by Tennessee & Associates-IV (Mt. Sterling), an Ohio general
partnership, as maker, to Payee in the original principal amount of
$5,850,000.00 (the "Existing Note"), which Existing Note is owned and
held by Payee. Borrower previously assumed and agreed to pay the
indebtedness evidenced by the Existing Note pursuant to that
certain Loan Extension Agreement dated as of July 15, 1994, between
Borrower and Lender. The Existing Note and the payment terms thereof
are hereby renewed, extended, modified and restated, and all the terms
of the Existing Note are superseded by, and subsumed within, the
terms hereof so as to consolidate the existing indebtedness; provided,
however that this Note shall not operate to discharge, satisfy, cancel,
release or repay, or be deemed a substitution or novation of, the
indebtedness heretofore evidenced by the Existing Note, which
indebtedness is hereby expressly preserved and confirmed in all
respects.
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<PAGE>
IN WITNESS WHEREOF, Borrower, intending to be legally
bound, has caused this Note to be duly signed, sealed and delivered on
the day and year first above written.
BRUNNER COMPANIES INCOME
PROPERTIES, L.P. III, a Delaware
limited general partnership
By its General Partner:
BRUNNER MANAGEMENT LIMITED
PARTNERSHIP, an Ohio limited partnership
By its General Partner:
104 MANAGEMENT, INC., an
Ohio corporation
By:/s/Robert D. Long
Robert D. Long,
Controller and Chief
Accounting Officer
8
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
$6,600,000.00 Dated: May 30, 1995
FOR VALUE RECEIVED, the undersigned, BRUNNER COMPANIES
INCOME PROPERTIES, L.P. III, a Delaware limited partnership (hereafter
referred to as "Borrower") promises to pay to the order of
NATIONAL HOME LIFE ASSURANCE COMPANY, a Missouri corporation
(hereafter referred to as "Payee"; Payee and/or any subsequent
holder(s) hereof, hereafter referred to as "Holder"), at Payee's address
c/o Providian Capital Management Real Estate Services, Section #808,
Louisville, Kentucky 40289, or at such other place as Holder shall
designate from time to time in writing, the principal sum of SIX
MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS ($6,600,000.00),
together with interest on the unpaid principal balance of such
indebtedness from time to time outstanding from the date of
disbursement at the rates hereinafter set forth, in lawful money of
the United States of America, such principal and interest being due
and payable as follows:
1. INTEREST AND PAYMENTS.
A. Interest Rate. Interest shall accrue on the
outstanding principal amount hereof at the rate of nine and
one-quarter percent (9.25%) per annum commencing on the date of this
Note (hereafter referred to as the "Closing") to and including the Final
Maturity Date (hereafter defined).
B. Payment Terms.
[1] Interest for the calendar month in which the
Closing takes place shall be prorated on a daily basis as
provided in Subparagraph 1D hereof and shall be paid in
advance at Closing. Thereafter, principal and interest shall
be payable in equal monthly installments of Sixty Thousand and
00/100 Dollars ($60,000.00), such installments to be due on the
first day of each calendar month during the term hereof,
commencing on the first day of the second full calendar month
following the Closing.
[2] The entire outstanding principal balance of the
indebtedness evidenced hereby, plus all accrued but unpaid
interest thereon, shall be due and payable on October 1, 2008
(hereafter referred to as "Final Maturity Date"). Borrower
acknowledges that monthly installments of principal and interest
required in Subparagraph B1 above are based on an amortization
period that is longer than the term of this Note, and
therefore a substantial portion of the principal balance of
this Note will be due on the Final Maturity Date.
C. Basis Point. As used in this Note, the term "Basis
Point" shall mean one one-hundredth (1/100th) of one percentage point of
interest.
D. Calculation of Interest. All interest on any
indebtedness evidenced by this Note shall be calculated on the basis
of a three hundred sixty (360)-day year composed of twelve (12) thirty
(30)-day months. Interest for partial months shall be calculated by
multiplying the principal balance of this Note by the applicable per
annum rate, dividing the product so obtained by 360, and multiplying the
result by the actual number of days elapsed.
2. APPLICATION OF PAYMENTS. All payments made under this Note
shall be applied first in reduction of any late charges, next in
reduction of any sums advanced by Holder to cure defaults under the
Mortgage (defined below), next in reduction of any applicable
prepayment premium, next in reduction of current interest, and any
remaining amount in reduction of the outstanding principal balance.
3. COLLATERAL. The indebtedness evidenced by this Note is
secured by,
<PAGE>
among other things: [i] that certain Open-End Mortgage, Assignment
of Rents and Security Agreement dated as of May 12, 1989, between
Tennessee & Associates-VII (Highpoint Village), an Ohio general
partnership, as mortgagor, and Commonwealth Life Insurance Company
("Commonwealth Life"), as mortgagee, recorded in Volume 93, Page 228,
as Instrument #319960, in the Logan County, Ohio records, the
obligations of the mortgagor thereunder having been assumed by Borrower
pursuant to that certain Loan Extension Agreement dated as of July
15, 1994, recorded in Volume 233, Page 830 as Instrument #9405904 in the
aforesaid records, as further amended by First Amendment to Open-End
Mortgage, Assignment of Rents and Security Agreement of even date
herewith between Borrower and Payee recorded or to be recorded in the
aforesaid records (as so amended, the "Mortgage"), conveying
Borrower's right, title and interest in property lying and being in
Logan County, Ohio as the same is more particularly described in the
Mortgage, to Payee as security for the performance by Borrower of its
obligations hereunder; [ii] an Assignment of Leases and Rents dated as
of May 12, 1989, between Tennessee & Associates-VII (Highpoint
Village), an Ohio general partnership, and recorded in Volume 93, Page
293, as Instrument #319961 in the Logan County, Ohio records,
the interests of Commonwealth Life having, been assigned to Payee by
Assignment dated May 15, 1989 recorded in Volume 233, Page 821 in
the aforesaid records, and the obligations of the assignor
thereunder having been assumed by Borrower pursuant to that
certain Loan Extension Agreement dated as of July 15, 1994, recorded in
Volume 233, Page 830, as Instrument #9405904 in the aforesaid
records, as further amended by First Amendment to Assignment of
Leases and Rents of even date herewith recorded or to be recorded
in the aforesaid records (as so amended, the "Assignment of Rents");
[iii] that certain Second Mortgage, Assignment of Rents and
Security Agreement dated as of the date hereof between Borrower, as
mortgagor, and Payee, as mortgagee, to be recorded in the Montgomery
County, Kentucky Clerk's Office, conveying Borrower's right, title and
interest in the property in Montgomery County, Kentucky commonly known
as the Gateway Plaza Shopping Center (the "Second Mortgage"); [iv] any
cash deposit, certificate of deposit or letter of credit given as
security for the indebtedness now evidenced by this Note; and [v]
any other document executed in connection with the indebtedness now
evidenced by this Note or the "Existing Note" (hereinafter
described). All of the property and other interests of the
Borrower encumbered by or subject to the terms of the Mortgage or
any other Loan Document (defined below) is hereafter referred to as the
"Property."
4. LATE CHARGE. Borrower shall pay to Holder a late charge
equal to four percent (4%) of any amount, including any interest, not
paid within five (5) days of the due date of such amount without
regard to the grace period provided in Paragraph 5 below, not as a
penalty, but as compensation to Holder for the cost of collecting and
processing such late payment. Borrower agrees that such late charge
represents a good faith reasonable estimate of the probable cost to
Holder of such delinquency. Holder shall have no obligation to accept
any late payment not accompanied by said late charge, but if Holder does
so, Holder shall not thereby waive its right to the late charge.
5. INTEREST UPON DEFAULT; ACCELERATION. In the event
that any payment of principal, interest, late charge or prepayment
premium under this Note is not paid within ten (10) days of its
due date, whether or not by reason of acceleration, such failure shall
constitute a default hereunder, and such amount shall bear interest
from the due date thereof until paid (including interest on any
judgment obtained by Holder until payment in full is received by
Holder) at the per annum rate which is three hundred (300) Basis Points
above the interest rate otherwise in effect hereunder. In the event of
such failure to pay, and/or if there occurs a default under the
Mortgage, the Assignment of Leases and Rents, the Second
Mortgage, the Environmental Indemnity Agreement of even date
herewith executed by Borrower in favor of Holder (the "Environmental
Indemnity Agreement"), or in or under any other document or
instrument evidencing, securing, or otherwise relating to the
indebtedness evidenced hereby (this Note, the Mortgage, the
Assignment of Leases and Rents, the Second Mortgage, the Environmental
Indemnity Agreement, and such other documents and instruments are
collectively
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<PAGE>
referred to as "Loan Documents", and all of the terms and conditions
thereof are hereby made a part of this Note to the same extent and with
the same force and effect as if they were fully set forth herein), which
default is not cured within the applicable notice and/or grace period,
if any, expressly provided therefor, Holder may at its option, in
addition to any other remedies to which it may be entitled, declare
the total unpaid principal balance of the indebtedness evidenced
hereby, together with all accrued but unpaid interest thereon and any
applicable prepayment premium and all other sums owing, immediately
due and payable.
6. PREPAYMENT; PREPAYMENT PREMIUM. Borrower may prepay the
indebtedness evidenced by this Note in whole or in part, at any time
and from time to time, without the payment of a prepayment
premium or penalty, provided [i] written notice of the amount of
such prepayment is given to Holder at least ninety (90) days prior to
any such prepayment, [ii] any partial prepayment must be in
multiples of $10,000, and [iii] no partial prepayment shall entitle
Borrower to the release of any collateral securing this Note. All
partial prepayments shall be applied in the manner provided in
Paragraph 2 above.
7. ATTORNEYS' FEES. Borrower shall indemnify Holder and hold
Holder harmless from and against any and all loss, cost, damage, or
expense, includ- ing attorney fees and litigation expenses, arising
out of or in connection with any default by Borrower under this Note
or any of the other Loan Documents, and in connection therewith, if
this Note is placed in the hands of an attorney for collection or is
collected through any legal or administrative proceeding, including
without limitation bankruptcy or insolvency proceedings, or if Holder
shall engage counsel in any matters relating to a default in the
performance of obligations to Holder under this Note, or any of
the Loan Documents, Borrower promises to pay, in addition to costs
and disbursements otherwise allowed, to the extent permitted by law,
reasonable attorneys' fees, including fees incurred for trial and
appellate proceedings.
8. WAIVER. Borrower hereby waives presentment for payment,
demand, protest, notice of nonpayment, demand, default, dishonor, and
protest.
9. FORBEARANCE. Holder shall not be deemed to have waived
any of Holder's rights or remedies under this Note unless such waiver
is express and in a writing signed by Holder, and no delay or omission
by Holder in exercising, or failure by Holder on any one or more
occasions to exercise, any of Holder's rights hereunder or under the
Loan Documents, or at law or in equity, including, without limitation,
Holder's right, after any default by Borrower, to declare the entire
indebtedness evidenced hereby immediately due and payable, shall be
construed as a novation of this Note or shall operate as a waiver or
prevent the subsequent exercise of any or all of such rights.
Acceptance by Holder of any portion or all of any sum payable
hereunder whether before, on or after the due date of such
payment, shall not be a waiver of Holder's right either to require
prompt payment when due of all other sums payable hereunder or to
exercise any of Holder's rights, powers and remedies hereunder or under
the Loan Documents. A waiver of any right on one occasion shall not
be construed as a waiver of Holder's right to insist thereafter
upon strict compliance with the terms hereof without previous
notice of such intention being given to Borrower, and no exercise of any
right by Holder shall constitute or be deemed to constitute an election
of remedies by Holder precluding the subsequent exercise by Holder of
any or all of the rights, powers and remedies available to it
hereunder, under any of the other Loan Documents, or at law or in
equity. Borrower expressly waives the benefit of any statute or rule
of law or equity now provided, or which may hereafter be provided,
which would produce a result contrary to, or in conflict with, the
foregoing. Borrower consents to any and all renewals and extensions
in the time of payment hereof without in any way affecting the
liability of Borrower or any person liable or to become liable with
respect to any indebtedness evidenced hereby. No extension of the
time for the payment of this Note or any installment due hereunder,
made by agreement with any person now
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<PAGE>
or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of
Borrower under this Note, either in whole or in part, unless
Holder agrees otherwise in writing.
10. RENUNCIATION AND ASSIGNMENT OF EXEMPTIONS. Borrower
hereby waives and renounces for itself, its legal representatives,
successors and assigns, all rights to the benefits of any statute
of limitations and any moratorium, reinstatement, marshalling,
forbearance, valuation, stay, extension, redemption, appraisement,
exemption, and homestead right, entitlement, or exemption now provided,
or which may hereafter be provided, by the Constitution or laws of
the United States of America or of any state thereof, both as to itself
and in and to all of its property, real and personal, against the
enforcement and collection of the obligations evidenced by this
Note. Borrower hereby transfers, conveys and assigns to Holder a
sufficient amount of such homestead right, entitlement, or
exemption as may be set apart in bankruptcy, to pay this Note in full,
with all costs of collection, and does hereby direct any trustee in
bankruptcy having possession of such homestead right, entitlement, or
exemption to deliver to Holder a sufficient amount of property or
money set apart as exempt to pay the indebtedness evidenced hereby,
or any renewal thereof, and does hereby appoint Holder the attorney-
in-fact for Borrower to claim any and all homestead right,
entitlement, or other exemptions allowed by law.
11. APPLICABLE LAW. This Note shall be governed by, enforced
under and interpreted in accordance with the laws of the State of
Ohio without giving effect to applicable principles of conflict of laws
to the extent that the application of the law of another jurisdiction
would be required thereby.
12. LIMIT ON INTEREST. If, from any circumstances whatsoever,
fulfillment of any provision of this Note, at the time performance
of such provision shall be due, shall involve transcending the
limit on interest presently prescribed by any applicable usury statute
or any other applicable law, with regard to obligations of like
character and amount, then Holder may at its option [i] declare the
entire indebtedness evidenced hereby, including interest, and all
other sums owing, immediately due and payable, [ii] reduce the
obligations to be fulfilled to such limit on interest, or [iii] apply
the amount that would exceed such limit on interest to the
reduction of the outstanding principal balance of this Note, and not
to the payment of interest, with the same force and effect as
though Borrower had specifically designated such sums to be so
applied to principal and Holder had agreed to accept such extra
payment(s) as a premium-free prepayment, so that in no event shall any
exaction be possible under this Note that is in excess of the
applicable limit on interest. It is the intention of Borrower and
Holder not to create any obligation in excess of the amount allowable
by applicable law. The provisions of this paragraph shall control
every other provision of this Note.
13. NOTICES. All notices, demands or requests provided
for or permitted to be given hereunder, shall be in writing and shall be
delivered in person or sent by registered or certified United States
mail, postage prepaid, return receipt requested, or by overnight
courier, to the addresses set out below or to such other addresses
as are specified by no less than ten (10) days prior written notice
delivered in accordance herewith:
If to Borrower: Brunner Companies Income Properties,
L.P. III
c/o Asset Management Department
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
4
<PAGE>
If to Holder: National Home Life Assurance Company
c/o Providian Capital Management Real
Estate Services
Asset Management Department, 12th Floor
P.O. Box 32830
Louisville, Kentucky 40232
All such notices, demands and requests shall be deemed effectively
given and delivered three (3) days after the postmark date of
mailing, the day after delivery to the overnight courier, or, if
delivered personally, when received. Rejection or other refusal to
accept or the inability to deliver because of a changed address of
which no notice was given in accordance with the time period provided
herein, shall be deemed to be receipt of the notice, demand or request
sent.
14. LIMITED EXCULPATION. Subject to the provisions of any guaranties
of the indebtedness created or arising under any of the Loan
Documents, but notwithstanding anything else to the contrary in this
Note or in any of the other Loan Documents, in any action or
proceeding brought to enforce the obligation of Borrower to pay any
indebtedness or obligation evidenced by, created or arising under this
Note or the Loan Documents or any of them, or to exercise any right
of foreclosure or power of sale contained in the Loan Documents of
the liens, security titles, estates, assignments, rights and security
interests now or at any time hereafter securing any indebtedness or
obligation pursuant to the Loan Documents, the judgment or decree
shall be enforceable against Borrower only to the extent of the interest
of Borrower in the Property, and any such judgment shall not be subject
to the execution on, nor be a lien on, any assets of Borrower
other than its interest in such Property, it being specifically
understood and agreed that Borrower shall have no personal liability
hereunder for the payment of this Note, and Holder shall look only to
the Property and any guaranties of this Note for the payment of the
indebtedness evidenced hereby; PROVIDED, HOWEVER that, notwithstanding
the foregoing provisions of this paragraph, Borrower shall be fully and
personally liable at all times for: [a] any costs, expenses, or
liability, including attorneys' fees, incurred by Holder arising from
any order, consent decree or settlement relating to the clean-up of
toxic or Hazardous Materials or waste products (as the same are
defined in the Mortgage); [b] repayment of the entire unpaid balance of
this Note in the event of fraud or material misrepresentations; and
[c] the misapplication of [i] proceeds paid under any insurance
policies by reason of damage, loss or destruction to all or any portion
of the Property, to the full extent of such proceeds, [ii] proceeds or
awards resulting from the condemnation or other taking in lieu of
condemnation of all or any portion of the Property, to the full extent
of such proceeds or awards, and [iii] from and after default, income,
rents, issues, profits, and revenues (collectively referred to as
"rents") arising or issuing from or out of all or any part of the
Property to the full extent of such rents. Nothing contained in this
paragraph shall [x] be deemed to be a release or impairment of the
indebtedness evidenced by this Note or the lien of the Loan Documents
upon the Property; [y] preclude Holder in the case of any default from
foreclosing the Loan Documents or exercising any power of sale
contained in the Loan Documents, or except as expressly limited in
this paragraph, from enforcing any of the other rights of Holder; or
[z] preclude Holder from enforcing its rights under any guaranties of
the indebtedness, pursuant to the terms of such guaranties.
15. TIME IS OF ESSENCE. TIME IS OF THE ESSENCE in complying
with all of the terms, provisions and conditions of this Note.
16. AMENDMENT. This Note may not be waived, changed,
modified or discharged orally, except by an agreement in writing
signed by the party against whom the enforcement of waiver, change,
modification or discharge is sought.
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<PAGE>
17. BORROWER. The term "Borrower" as used herein shall
include the maker(s) of this Note and all person(s) or entity(ies) now
or hereafter liable with respect to this Note, whether as maker,
principal, surety, guarantor, endorser or otherwise, each of whom shall
be jointly and severally liable for all of the obligations of the
maker(s) hereunder.
18. SEPARATE ACTIONS. Each installment of principal and interest
owing on this Note may be recovered in a separate action, or in the
event that Holder accelerates the maturity of this Note pursuant to
Holder's options hereunder or under any of the other Loan Documents,
all sums becoming due and payable pursuant to such acceleration may
be recovered in a single action. Holder, or any person claiming by,
through, or under Holder, shall have the absolute right to seek one
or more money judgments in each such cause of action based on this
Note.
19. GENDER. The singular shall include the plural and vice versa.
The obligations and liabilities hereunder are joint and several and
shall be binding upon the heirs, successors, legal
representatives, endorsers and assigns of the parties hereof.
20. PROHIBITED OR UNENFORCEABLE CLAUSE. If any provision of this Note
is found by a court of competent jurisdiction to be prohibited or
unenforceable, it shall be ineffective only to the extent of
such prohibition or unenforceability and such prohibition or
unenforceability shall not invalidate the balance of such provision to
the extent it is not prohibited or unenforceable, nor invalidate
the other provisions hereof, all of which shall be liberally
construed in favor of Holder in order to effect the provisions of this
Note.
21. GENERAL PARTNERS. Borrower represents and warrants that the
undersigned constitute all of the general partners of the Borrower.
22. HEADINGS. The underlined words appearing at the
commencement of the paragraphs are included only as a guide to the
contents thereof and are not to be considered as controlling,
enlarging or restructuring the language or meaning of those paragraphs.
23. CROSS-DEFAULT. Holder's affiliated company, Commonwealth Life
Insurance Company ("Commonwealth") is the holder of a certain
amended and restated promissory note dated as of the date of this Note
made by Borrower to the order of Commonwealth in the principal amount
of $5,616,000 (the "Related Note"). A default under or breach of any
of the terms or provisions (following any applicable grace or cure
period, if any, expressly provided therein) of [i] the Related Note,
[ii] that certain Mortgage, Assignment of Rents and Security Agreement
dated as of May 12, 1989, recorded in Mortgage Book 129, Page 218, in
the Montgomery County, Kentucky records, as amended by Loan Extension
Agreement dated as of July 15, 1994, recorded in Volume 159, Page 249
in the Montgomery County, Kentucky records, as further amended by
First Amendment to Mortgage, Assignment of Rents and Security Agreement
dated as of the date of this Agreement and recorded in the
Montgomery County, Kentucky records (as so amended, the "Related
Mortgage"), [iii] that certain Assignment of Leases and Rents dated as
of May 12, 1989, recorded in Miscellaneous Book 43, Page 55 in the
Montgomery County, Kentucky records, as amended by Loan Extension
Agreement dated as of July 15, 1994, recorded in Volume 159, Page 249
in the Montgomery County, Kentucky records, as further amended by
First Amendment to Assignment of Leases and Rents dated as of the
date of this Agreement and recorded in the Montgomery County,
Kentucky records (as so amended, the "Related Assignment of Rents"),
or [iv] any other instrument or document securing and/or pertaining to
the loan now evidenced by the Related Note (the "Related Loan") (the
Related Note, the Related Mortgage, the Related Assignment of Rents,
and all such other instruments and documents securing and/or
pertaining to the Related Loan are sometimes collectively referred to
herein as the "Related Loan Documents"), shall constitute a default
under this Note, the Mortgage, the Assignment of Rents and the other
Loan Documents; and Payee may accelerate the indebtedness evidenced
by
6
<PAGE>
this Note, foreclose the Mortgage, foreclose the Second Mortgage,
and/or exercise all other rights and remedies of Payee upon Borrower's
default under the Loan Documents or otherwise available to a mortgagee
or secured party under applicable law.
24. NO NOVATION. This Note evidences the principal
indebtedness of $6,600,000.00 remaining unpaid on, and heretofore
evidenced by, that certain promissory note dated May 12, 1989,
made by Tennessee & Associates-VII (Highpoint Village), an Ohio
general partnership, as maker, to Payee in the original principal
amount of $6,600,000.00 (the "Existing Note"), which Existing Note
is owned and held by Payee. Borrower previously assumed and agreed to
pay the indebtedness evidenced by the Existing Note pursuant to that
certain Loan Extension Agreement dated as of July 15, 1994, between
Borrower and Payee. The Existing Note and the payment terms
thereof are hereby renewed, extended, modified and restated, and all
the terms of the Existing Note are superseded by, and subsumed
within, the terms hereof so as to consolidate the existing
indebtedness; provided, however that this Note shall not operate to
discharge, satisfy, cancel, release or repay, or be deemed a
substitution or novation of, the indebtedness heretofore evidenced
by the Existing Note, which indebtedness is hereby expressly preserved
and confirmed in all respects.
7
<PAGE>
IN WITNESS WHEREOF, Borrower, intending to be legally
bound, has caused this Note to be duly signed and delivered on the
day and year first above written.
BRUNNER COMPANIES INCOME
PROPERTIES, L.P. III, a Delaware
limited general partnership
By its General Partner:
BRUNNER MANAGEMENT LIMITED
PARTNERSHIP, an Ohio limited partnership
WITNESSES:
By its General Partner:
/s/Kelley M. Buechler 104 MANAGEMENT, INC., an
Signature Ohio corporation
Kelley M. Buechler
Printed Name By: /s/Robert D. Long
Robert D. Long,
/s/Nancy A. Dixon Controller and Chief
Signature Accounting Officer
Nancy A. Dixon
Printed Name
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Brunner Companies Income Properties L.P. III's 1995 Second Quarter 10-
QSB and is qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 840,952
<SECURITIES> 0
<RECEIVABLES> 170,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,080,248
<PP&E> 20,665,694
<DEPRECIATION> 3,551,891
<TOTAL-ASSETS> 18,383,125
<CURRENT-LIABILITIES> 165,211
<BONDS> 17,499,332
<COMMON> 0
0
0
<OTHER-SE> 718,582
<TOTAL-LIABILITY-AND-EQUITY> 18,383,125
<SALES> 0
<TOTAL-REVENUES> 1,112,728
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,681,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 817,077
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 275,769
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
