DEED OF
TRUST, MORTGAGE AND
SECURITY AGREEMENT
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF
DALLAS )
THAT, ESC II, L.P., a Washington limited
partnership (hereinafter called "GRARZTOR"
whether one or more), for and in
consideration of the sum of Ten Dollars
($10.00) to Grantor in hand paid by Xxxxxx X.
Xxxxxx, Trustee, of Dallas County, Texas
(hereinafter called the TRUSTEE"), in order
to secure the payment of the indebtedness
hereinafter referred to and the performance
of the obligations, covenants, agreements and
undertakings of Grantor hereinafter
described, does hereby GRANT, BARGAIN, SELL,
CONVEY, TRANSFER, ASSIGN and SET OVER to the
Trustee the real estate situated in the
County of Dallas and State of Texas described
in Exhibit A attached hereto and made a part
hereof, together with all of Grantor's right,
title and interest in and to (i) all the
buildings and other improvements now on or
that may be placed hereafter on said land
during the existence of this lien; (ii) all
materials, equipment, fixtures or other
property whatsoever now or hereafter attached
to, installed in, or used in connection with
the buildings and other improvements now
erected or hereafter to be erected on said
land, including, but not limited to, all
heating p g lighting, water heating, cooking,
laundry, refrigerating, incinerating,
ventilating and air conditioning equipment,
disposals, dishwashers, refrigerators and
ranges, recreational equipment and apparatus,
utility lines and equipment (whether owned
individually or jointly with others),
sprinkler systems, fire extinguishing
apparatus and equipment, water tanks,
swimming pools, engines, machines, elevators,
motors, cabinets, shades, blinds, partitions,
window screens, screen doors, storm windows,
awnings, drapes, and rugs and other floor
coverings, and all fixtures, accessions and
appurtenances thereto, and all renewals or
replacements of or substitutions for any of
the foregoing, all of which property and
things are hereby declared to be permanent
fixtures and accessions to the freehold and
part of the realty conveyed herein as
security for the indebtedness herein
mentioned, but excluding specifically any
personal property owned by tenants, residents
or occupants (collectively, the 'TENANTS");
(iii) all easements and rights of way used in
connection with any of the foregoing property
or as a means of ingress to or egress from
said property; (iv) all interests of Grantor
in and to any streets, ways, alleys and/or
strips of land adjoining said land or any
part thereof; and (v) all rights, estates,
powers and privileges appurtenant or incident
to the foregoing.
THIS AGREEMENT CONTAINS INDEMNIFICATION
PROVISIONS
WHICH, AMONG OTHER MATTERS AND IN CERTAIN
CIRCUMSTANCES, INDEMNIFY THE NOTEHOLDER
AGAINST THE
CONSEQUENCES OF THE NOTEHOLDER'S OWN
NEGLIGENCE AND AGAINST ANY STRICT LIABIUTY
IMPOSED ON THE NOTEHOLDER
TO HAVE AND TO HOLD the foregoing
property (herein called the "MORTGAGED
PROPERTY") unto the Trustee and his
successors or substitutes in this trust and
to his or their successors and assigns, IN
TRUST, however, upon the terms, provisions
and conditions herein set forth.
In order to secure the payment of the
indebtedness hereinafter referred to and the
performance of the obligations, covenants,
agreements and undertakings of Grantor
hereinafter described, Grantor hereby grants
to the Noteholder (as hereinafter defined) a
security interest in all goods, equipment,
furnishings, fixtures, furniture, chattels
and personal property of whatever nature
owned by Grantor now or hereafter attached or
affixed to or used in and about the building
or buildings or other improvements now
erected or hereafter to be erected on the
lands described in Exhibit A attached hereto
and made a part hereof, or otherwise located
on said lands, and all fixtures, accessions
and appurtenances thereto, and all renewals
or replacements of or substitutions for any
of the foregoing, all building materials and
equipment now or hereafter delivered to said
premises and intended to be installed
therein, all security deposits and advance
rentals under lease agreements now or at any
time hereafter covering or affecting any of
the Property (as hereinafter defined) and
held by or for the benefit of Grantor, all
monetary deposits which Grantor has been
required to give to any public or private
utility with respect to utility services
furnished to the Property, all rents, issues
and profits from leases of all or any part of
the Property, all proceeds (including premium
refunds) of each policy of insurance relating
to the Property, all proceeds from the taking
of the Property or any part thereof or any
interest therein or right or estate
appurtenant thereto by eminent domain or by
purchase in lieu thereof, all contracts
related to the Property, all money, funds,
accounts, instruments, documents, general
intangibles (including trademarks, trade
names and symbols used in connection
therewith), all notes or chattel paper
arising from or related to the Property, all
permits, licenses, franchises, certificates,
and other rights and privileges obtained in
connection with the Property, including
without limitation and to the extent
assignable, all licenses and permits now or
hereafter issued by the Texas Department of
Human Services or its successors or any other
applicable governmental authority in
connection with the operation of a personal
care facility or assisted living facility
within the Property, all plans,
specifications, maps, surveys, reports,
architectural, engineering and construction
contracts, books of account, insurance
policies and other documents, of whatever
kind or character, relating to the use,
construction upon, occupancy, leasing, sale
or operation of the Property, all proceeds
and other amounts paid or owing to Grantor
under or pursuant to any and all contracts
and bonds relating to the construction,
erection or renovation of the Property, all
oil, gas and other hydrocarbons and other
minerals produced from or allocated to the
Property and all products processed or
obtained therefrom, the proceeds thereof, all
accounts and general intangibles under which
such proceeds may arise, together with any
sums of money that may now or at any time
hereafter become due and payable to Grantor
by virtue of any and all royalties,
overriding royalties, bonuses, delay rentals
and any
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other amount of any kind or character arising
under any and all present and future oil, gas
and mining leases covering the Property or
any part thereof, and all inventory now or
hereinafter situated or located in or about
the building or buildings or other
improvements now erected or hereafter to be
erected on the lands described in Exhibit A
attached hereto and made a part hereof (all
of the property described in this paragraph
hereinafter collectively called the
"COLLATERAL") and all proceeds of the
Collateral. (The Mortgaged Property and the
Collateral are herein sometimes collectively
called the "PROPERTY").
ARTICLE 1
SECURED
INDEBTEDNESS
1.1 SECURED INDEBTEDNESS. This Deed of
Trust, Mortgage and Security Agreement
(hereinafter called this "MORTGAGE") is made
to secure and enforce the payment of the
following note, obligations, indebtedness and
liabilities: (a) one certain promissory note
of even date herewith in the principal amount
of Seventeen Million and No/100 Dollars
($17,000,000.00) made by Grantor, and payable
to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, with
interest at the rate or rates therein
provided, both principal and interest being
payable as therein provided and all amounts
remaining unpaid thereon, and containing a
provision for the payment of a reasonable
additional amount as attorney's fees, and all
other notes given in substitution therefor or
in modification, increase, renewal or
extension thereof, in whole or in part, such
note and all other notes given in
substitution therefor or in modification,
increase, renewal or extension thereof, in
whole or in part, being hereinafter called
the "NOTE", and said payee and all subsequent
holders of the Note or any part thereof or
any interest therein or any of the "secured
indebtedness" (as hereinafter defined) being
hereinafter called the "NOTEHOLDER"; and (b)
all loans and future advances made by the
Noteholder to Grantor and all other debts,
obligations arid liabilities of every kind
and character of Grantor now or hereafter
existing in favor of the Noteholder
(including all indebtedness incurred or
arising pursuant to the provisions of this
Mortgage or any loan agreement relating to
the above described indebtedness or any other
instrument now or hereafter evidencing,
governing or securing the above described
indebtedness or any part thereof) whether
such debts, obligations or liabilities be
direct or indirect, primary or secondary,
joint or several, fixed or contingent, and
whether such debts, obligations and
liabilities are evidenced by note, open
account, overdraft, endorsement, surety
agreement, .guaranty or otherwise, it being
contemplated that Grantor may hereafter
become indebted to the Noteholder in further
sum or sums. The indebtedness referred to in
this Paragraph is hereinafter sometimes
called the "SECURED INDEBTEDNESS" or the
"INDEBTEDNESS SECURED HEREBY."
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ARTICLE 2
REPRESENTATIONS: WARRANTIES AND
COVENANTS
2.1 REPRESENTATIONS. WARRANTIES AND
COVENANTS. Grantor represents, warrants and
covenants to and with the Noteholder as
follows:
(a) FINANCIAL MATTERS. Grantor is
solvent, is not bankrupt and has no
outstanding liens, suits, garnishments,
bankruptcies or court actions which could
render Grantor insolvent or bankrupt. There
has not been filed by or against Grantor a
petition in bankruptcy or a petition or
answer seeking an assignment for the benefit
of creditors, the appointment of a receiver,
trustee, custodian or liquidator with respect
to Grantor or any substantial portion of
Grantor's property, reorganization,
arrangement, rearrangement, composition,
extension, liquidation or dissolution or
similar relief under the Federal Bankruptcy
Code or any state law. All reports,
statements and other data furnished by
Grantor to the Noteholder in connection with
the loan evidenced by the Note are true and
correct in all material respects and do not
omit to state any fact or circumstance
necessary to make the statements contained
therein not misleading. No material adverse
change has occurred since the dates of such
reports, statements and other data in the
financial condition of Grantor or of any
Tenants under Leases described in such
reports, statements and other data. For the
purposes of this paragraph, Grantor shall
also include any surety(ies) and any joint
venturer or general partner of Grantor.
(b) TITLE AND AUTHORITY. Grantor is the
lawful owner of good and indefeasible title
to the Property and has good right and
authority to grant, bargain, sell, transfer,
assign and mortgage the Mortgaged Property
and to grant a security interest in the
Collateral. Grantor does not do business with
respect to the Property under any trade name.
(c) PERMITTED ENCUMBRANCES. The Property
is free and clear from all liens, security
interests and encumbrances except the lien
and security interest evidenced hereby and
the encumbrances set forth in Exhibit B
attached hereto and made a part hereof
(hereinafter called the "PERMITTED
ENCUMBRANCES"). There are no mechanic's or
materialmen's liens, or other claims
constituting or that may constitute a lien on
the Property, or any part thereof.
(d) NO FINANCING STATEMENT. There is no
financing statement covering the Property or
its proceeds on file in any public office.
(e) LOCATION OF COLLATERAL. All tangible
Collateral is or will be located on the
property described in Exhibit A attached
hereto and made a part hereof.
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(f) NO HOMESTEAD. No portion of the
Property is being used, or is intended to be
used in the future, as Grantor's business or
residential homestead.
(g) NO DEFAULT OR VIOLATION. The
execution, delivery and performance of this
Mortgage, the Note and all other instruments
or documents evidencing, securing or relating
to the secured indebtedness (hereinafter
called the "LOAN DOCUMENTS") do not
contravene, result in a breach of or
constitute a default under any mortgage, deed
of trust, lease, promissory note, loan
agreement or other contract or agreement to
which Grantor is a party or by which Grantor
or any of its properties may be bound or
affected and do not violate or contravene any
law, order, decree, rule or regulation to
which Grantor is subject.
(h) COMPLIANCE WITH COVENANTS AND LAWS.
The Property and the intended use thereof by
Grantor comply with all applicable
restrictive covenants, zoning ordinances and
building codes, flood disaster laws,
applicable health and environmental laws and
regulations and all other applicable laws,
statutes, ordinances, rules, regulations,
orders, determinations and court decisions
(all of the foregoing hereinafter sometimes
collectively called "APPLICABLE LAWS" without
reliance upon grandfather provisions or
adjacent or other properties; Grantor has
obtained, or will obtain prior to the
Noteholder's first disbursement for
construction costs, all requisite zoning,
utility, building, health and operating
permits from the governmental authority or
municipality having jurisdiction over the
Property. All engineering specifications with
respect to the Properly are within applicable
environmental standards.
(i) ENVIRONMENTAL. Without limitation of
the foregoing, the Property and Grantor are
not in violation of or subject to any
existing, pending or threatened investigation
or inquiry by any governmental authority or
to any remedial obligations under any
Applicable Laws pertaining to health or the
environment (such Applicable Laws as they now
exist or are hereafter enacted and/or amended
hereinafter sometimes collectively called
"APPLICABLE ENVIRONMENTAL LAWS"), including
without limitation the Comprehensive
Environmental Response, Compensation, and
Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act
of 1986 (as amended, hereinafter called
"CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended by the Used
Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984
(as amended, hereinafter called "RCRA"), the
Texas Water Code and the Texas Solid Waste
Disposal Act, except as may be disclosed in
that certain environmental report dated
October 2, 1996, prepared by Atec Associates,
Inc., provided to the Noteholder, and to the
best of Grantor's knowledge, this
representation would continue to be true and
correct following disclosure to the
applicable governmental authorities of all
relevant facts, conditions and circumstances,
if any, pertaining to the Property and
Grantor.
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Grantor has not obtained and is not required
to obtain any permits, licenses or similar
authorizations to construct, occupy, operate
or use any buildings, improvements, fixtures
and equipment forming a part of the Property
by reason of any Applicable Environmental
Laws. Grantor undertook, at the time of
acquisition of the Property, all appropriate
inquiry into the previous ownership and uses
of the Property consistent with good
commercial or customary practice. Grantor has
taken all steps necessary to determine and
has determined that no hazardous substances
or solid wastes have been disposed of or
otherwise released on or to the Property. The
use which Grantor makes and intends to make
of the Property will not result in the
disposal or other release of any hazardous
substance or solid waste on or to the
Property. The terms "hazardous substance" and
"release" as used in this Mortgage shall have
the meanings specified in CERCLA, and the
terms "solid waste" and "disposal" (or
"disposed") shall have the meanings specified
in RCRA; provided, in the event either CERCLA
or RCRA is amended so as to broaden the
meaning of any term defined thereby, such
broader meaning shall apply subsequent to the
effective date of such amendment and provided
further, to the extent that the laws of the
State of Texas establish a meaning for
"hazardous substance," "release," "solid
waste," or "disposal" (or "disposed") which
is broader than that specified in either
CERCLA or RCRA, such broader meaning shall
apply.
(j) NO SUITS. There are no judicial or
administrative actions, suits or proceedings
pending or, to the best of Grantor's
knowledge, threatened against or affecting
Grantor, any other person liable, directly or
indirectly, for the secured indebtedness, or
the Property or involving the validity,
enforceability or priority of any of the Loan
Documents.
(k) CONDITION OF PROPERTY. The Property
is or will be served by electric, gas, storm
and sanitary sewers, sanitary water supply,
telephone and other utilities required for
the use thereof as represented by Grantor at
or within the boundary lines of the Property.
All streets, alleys and easements necessary
to serve the Property for the use represented
by Grantor have been completed and are
serviceable and such streets have been
dedicated and accepted by applicable
governmental entities. The Property is free
from damage caused by fire or other casualty.
Grantor is aware of no latent or patent
structural or other significant deficit or
deficiency in the Property. Design and as-
built conditions of the Property are such
that no drainage or surface or other water
will drain across or rest upon either the
Property or land of others, except in the
manner permitted by applicable law. None of
the Property is within a flood plain except
as indicated on a survey of the Property
delivered to the Noteholder. None of the
improvements on the Property create an
encroachment over, across or upon any of the
Property boundary lines, rights of way or
easements, and no buildings or other
improvements on adjoining land create such an
encroachment.
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(l) ORGANIZATION. Grantor, if a
corporation, is duly incorporated and legally
existing under the laws of the State of its
incorporation and is duly qualified to do
business in the State of Texas. Grantor, if a
partnership or joint venture, is duly
organized under the Texas Revised Partnership
Act. Grantor, if a limited partnership, is
duly organized under the Texas Revised
Limited Partnership Act or if organized under
the laws of a state other than Texas, is
qualified under the Texas Revised Limited
Partnership Act. Grantor, if a limited
liability company, is duly organized under
the Texas Limited Liability Act, or if
organized under the laws of a state other
than Texas, is qualified under the Texas
Limited Liability Act. Grantor has all
requisite power and all governmental
certificates of authority, licenses, permits,
qualifications and other documentation to
own, lease and operate its properties and to
carry on its business as now conducted and as
contemplated to be conducted. The foregoing
representations in this subparagraph shall
also apply to any corporation, partnership,
joint venture or limited partnership which is
a general partner or joint venturer of
Grantor.
(m) ENFORCEABILITY. The Note, this
Mortgage and all other instruments securing
the payment of the Note constitute the legal,
valid and binding obligations of Grantor
enforceable in accordance with their terms.
The execution and delivery of, and
performance under, the Note, this Mortgage
and all other instruments securing the
payment of the Note are within Grantor's
powers and have been duly authorized by all
requisite action and are not in contravention
of the powers of Grantor's charter, by-laws
or other corporate papers if Grantor is a
corporation, or of Grantor's partnership or
joint venture agreement if Grantor is a
partnership or joint venture, or of Grantor's
limited partnership agreement if Grantor is a
limited partnership, or of Grantor's articles
or operating agreement if Grantor is a
limited liability company.
(n) NOT A FOREIGN PERSON. Grantor is not
a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended
(hereinafter called the "CODE"), Sections
1445 and 7701 (i.e. Grantor is not a
nonresident alien, foreign corporation,
foreign partnership, foreign trust or foreign
estate as those terms are defined in the Code
and regulations promulgated thereunder).
(o) WARRANTY. Grantor will warrant and
forever defend the title to the Property
against the claims of all persons whomsoever
claiming or to claim the same or any part
thereof, subject to the Permitted
Encumbrances.
2.2. COVENANTS AND AGREEMENTS. So long
as the secured indebtedness or any part
thereof remains unpaid, Grantor covenants and
agrees with the Noteholder as follows:
(a) PAYMENT. Grantor will make prompt
payment, as the same becomes due, of the Note
and of all installment of principal and
interest thereon and of all other secured
indebtedness.
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(b) EXISTENCE. Grantor will continuously
maintain its existence and its right to do
business in the State of Texas together with
its franchises and trade
names.
(c) TAXES ON NOTE AND OTHER TAXES.
Grantor will promptly pay all income,
franchise and other taxes owing by Grantor
and any stamp taxes which may be required to
be paid with respect to the Note, this
Mortgage or any other instrument evidencing
or securing any of the secured indebtedness.
(d) OPERATION OF PROPERTY. Grantor will
operate the Property in a good and
workmanlike manner and in accordance with all
Applicable Laws and will pay all fees or
charges of any kind in connection therewith.
Grantor will keep the Property occupied so as
not to impair the insurance carried thereon.
Grantor will not use or occupy, or allow the
use or occupancy of, the Property in any
manner which violates any Applicable Law or
which constitutes a public or private
nuisance or which makes void, voidable or
cancelable, or increases the premium of, any
insurance then in force with respect thereto.
Grantor shall cause the Property to be at all
times managed by a management agent,
acceptable to the Noteholder, pursuant to a
management agreement, in the form and
substance acceptable the to the Noteholder.
Grantor will not initiate or permit any
zoning reclassification of the Property or
seek any variance under existing zoning
ordinances applicable to the Property or use
or permit the use of the Property in such a
manner which would result in such use
becoming a nonconforming use under applicable
zoning ordinances or other Applicable Laws.
Grantor will not impose any restrictive
covenants or encumbrances upon the Property,
execute or file any subdivision plat
affecting the Property or consent to the
annexation of the Property to any
municipality, without the prior written
consent of the Noteholder. Grantor shall not
cause or permit any drilling or exploration
for, or extraction, removal or production of,
minerals from the surface or subsurface of
the Property. Grantor will not do or suffer
to be done any act whereby the value of any
part of the Property may be lessened. Grantor
will allow the Noteholder or its authorized
representative to enter the Property, after
reasonable notice and during normal business
hours, to inspect the Property and Grantor's
books and records pertaining thereto and
Grantor will assist the Noteholder or said
representative as reasonably necessary to
make such inspection. Prior to any such
inspection, Grantor shall provide the
Noteholder with a current certified rent roll
of all parties in possession and other data
reasonably necessary for the Noteholder or
its representative to conduct its inspection.
If Grantor receives a notice or claim from
any federal, state or other governmental
entity pertaining to the Property, including
specifically but without limitation a notice
that the Property is not in compliance with
any Applicable Law, Grantor will promptly
furnish a copy of such notice or claim to the
Noteholder.
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(e) DEBTS FOR CONSTRUCTION. Grantor will
cause all debts and liabilities of any
character, including without limitation all
debts and liabilities for labor, material and
equipment and all debts and charges for
utilities servicing the Property; incurred in
the construction, maintenance, operation and
development of the Property to be promptly
paid. Grantor shall comply with the Loan
Agreement relating to disbursement of
construction funds and lien waivers in
connection with such disbursements. Pursuant
to the Loan Agreement, Grantor shall cause
payment and performance bonds to be
maintained. If Grantor fails to maintain such
payment and performance bonds, and in the
event Grantor fails to discharge any
mechanic's liens filed against the Property
or any portion thereof, in addition to any
other right or remedy provided to the
Noteholder hereunder, the Noteholder may, but
shall not be obligated to, discharge the same
either by paying the amount claimed to be due
or by procuring the discharge of such lien by
deposit or by bonding proceedings;
notwithstanding the foregoing to the
contrary, Grantor shall have the right to
contest in good faith any such mechanic's
liens filed against the Property in
accordance with Section 4.1 (r) of the Loan
Agreement. It any suit or proceeding shall be
brought to foreclose or enforce any such
lien, Grantor shall, at its own sole cost and
expense, promptly pay, satisfy and discharge
any final judgment entered therein, and if
Grantor fails to do so, then the Noteholder,
at its option, may do so. All amounts,
charges, costs, expenses, fees and sums
incurred or disbursed by the Noteholder in
connection with the foregoing shall be a
demand obligation owing by Grantor to the
Noteholder pursuant to this Mortgage and
shall be subject to and covered by the
provision of paragraph 2.3 hereof.
(f) AD VALOREM TAXES. Grantor will cause
to be paid prior to delinquency all taxes and
assessments heretofore or hereafter levied or
assessed against the Property, or any part
thereof, or against the Trustee or the
Noteholder (except for any income taxes or
franchise taxes levied or assessed against
the Trustee or the Noteholder) for or on
account of the Note or the other indebtedness
secured hereby or the interest created by
this Mortgage and will furnish the Noteholder
with receipts showing payment of such taxes
and assessments at least fifteen (15) days
prior to the applicable default date
therefor; except that Grantor may in good
faith, by appropriate proceedings, contest
the validity, applicability, or amount of any
asserted tax or assessment, and pending such
contest Grantor shall not be deemed in
default hereunder if (i) prior to delinquency
of the asserted tax or assessment Grantor
establishes an escrow acceptable to the
Noteholder adequate to cover the payment of
such tax or assessment with interest, costs
and penalties and a reasonable additional sum
to cover possible costs, interest and
penalties (which escrow shall be returned to
Grantor upon payment of all such taxes,
assessments, interest, costs and penalties);
(ii) Grantor pays to the Noteholder promptly
after demand therefor all costs and expenses
incurred by the Noteholder in connection with
such contest; and (iii) Grantor promptly
causes to be paid any amount adjudged by a
9
court of competent jurisdiction to be due,
with all costs, penalties and interest
thereon, promptly after such judgment becomes
final; provided, however, that in any event
each such contest shall be concluded and the
tax, assessment, penalties, interest and
costs shall be paid prior to the date any
writ or order is issued under which the
Property may be sold.
(g) REPAIR AND MAINTENANCE. Grantor will
keep the Property in first class order,
repair, operating condition and appearance,
causing all necessary repairs, renewals,
replacements, additions and improvements to
be promptly made, and will not allow any of
the Property to be misused, abused or wasted
or to deteriorate. Grantor will promptly
replace all worn-out or obsolete fixtures or
personal property covered by this Mortgage
with fixtures or personal property comparable
to the replaced fixtures or personal property
when new, and will repaint the Property when
needed. Notwithstanding the foregoing,
Grantor will not, without the prior written
consent of the Noteholder, (i) remove from
the Property any fixtures or personal
property covered by this Mortgage except such
as is replaced by Grantor (if such
replacement is reasonably necessary or
required in the operation of Grantor's
business) by an article of equal suitability
and value, owned by Grantor, free and clear
of any lien or security interest (except that
created by this Mortgage), (ii) make any
structural alteration to the Property (other
than the initial construction of the
Mortgaged Property pursuant to the Loan
Agreement) or any other alterations thereto
which impair the value thereof or (iii)
during construction of improvements, make any
changes to the Plans and Specifications (as
defined in the Loan Agreement) except as
provided in the Loan Agreement and, following
completion of construction, make any
alteration to the Property involving an
estimated expenditure exceeding $25,000
except pursuant to plans and specifications
approved in writing by the Noteholder. Upon
request of the Noteholder, Grantor will
deliver to the Noteholder an inventory
describing and showing the make, model,
serial number and location of all fixtures
and personal property used in the management,
maintenance and operation of the Property
with a certification by Grantor that said
inventory is a true and complete schedule of
all such fixtures and personal property used
in the management, maintenance and operation
of the Property, that such items specified in
the inventory constitute all of the fixtures
and personal property required in the
management, maintenance and operation of the
Property, and that all such items are owned
by Grantor free and clear of any lien or
security interest (except that created by
this Mortgage).
(h) INSURANCE AND CASUALTV. Grantor will
keep the Property insured against loss or
damage by fire, explosion, windstorm, hail,
flood (if the Property shall at any time be
located in an identified "flood prone area"
in which flood insurance has been made
available pursuant to the Flood Disaster
Protection Act of 1973), tornado and such
other hazards as may be required by the
Noteholder (including war damage if available
under sponsorship of the
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United States Government when war is
threatened or declared) by policies of fire,
extended coverage and other insurance in such
company or companies, in such amounts, upon
such terms and provisions, and with such
endorsements, all as may be reasonably
acceptable to the Noteholder. Grantor will
also provide such other insurance as the
Noteholder may from time to time require, in
such companies, upon such terms and
provisions, in such amounts, and with such
endorsements, all as are reasonably approved
by the Noteholder. Grantor further agrees
that Grantor will deliver to the Noteholder
the original certificates evidencing such
insurance and any additional insurance which
shall be taken out upon any part of the
Property and receipts evidencing the payment
of all premiums, and will deliver
certificates evidencing renewals of all such
policies of insurance to the Noteholder at
least fifteen (15) days before any such
insurance shall expire. Without limiting the
discretion of the Noteholder with respect to
required endorsements to insurance policies,
Grantor further agrees that all such policies
shall provide that proceeds thereunder will
be payable to the Noteholder as its interest
may appear pursuant and subject to a mortgage
clause (without contribution) of standard
form attached to or otherwise made a part of
the applicable policy. In the event of
foreclosure of this Mortgage, or other
transfer of title to the Property in
extinguishment in whole or in part of the
secured indebtedness, all right, title and
interest of Grantor in and to such policies
then in force concerning the Property and all
proceeds payable thereunder shall thereupon
vest in the purchaser at such foreclosure or
the Noteholder or other transferee in the
event of such other transfer of title. In the
event any of the Property covered by such
insurance is destroyed or damaged by fire,
explosion, windstorm, hail or by any other
casualty against which insurance shall have
been required hereunder, (i) the Noteholder
may, but shall not be obligated to, make
proof of loss if not made promptly by
Grantor, (ii) each insurance company
concerned is hereby authorized and directed
to make payment for such loss directly to the
Noteholder instead of to Grantor, and (iii)
the Noteholder shall have the right to apply
the insurance proceeds as follows:
(i) first, to reimburse the
Noteholder or the Trustee for all costs
and expenses, including reasonable
attorney's fees, incurred in connection
with the collection of such proceeds;
and
(ii) second, the remainder of said
proceeds shall be applied, at the
discretion of the Noteholder, in payment
(without premium or penalty unless such
are otherwise payable under the Note due
to acceleration or otherwise) of the
secured indebtedness, either in whole or
in part, whether or not then due and
payable, in the order determined by the
Noteholder in its sole discretion, or to
the repair, restoration or replacement,
either partly or entirely, of the
Property so destroyed or damaged,
provided that, any insurance proceeds
held by the Noteholder to be applied to
the repair, restoration or replacement
of the Property shall be so held without
payment or allowance of interest thereon
and shall be paid out from time to time
upon compliance by Grantor with
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such terms, conditions and requirements
as may be imposed by the Noteholder.
Notwithstanding the preceding sentence
to the contrary, in the event any damage
or destruction of the Property results
in a claim of loss of less than
$100,000, the remainder of said
insurance proceeds (after reimbursement
of the Noteholder or the Trustee for all
costs and expenses, including reasonable
attorney's fees, if any, incurred in
connection with the collection of such
proceeds) shall be applied to the
repair, restoration or replacement of
the portion of the Property so destroyed
or damaged. In any event,
notwithstanding the occurrence of any
casualty, the unpaid portion of the
secured indebtedness shall remain in
full force and effect (except to the
extent of application of insurance
proceeds as provided above) and Grantor
shall not be excused in the payment
thereof. If any act or occurrence of any
kind or nature (including any casualty
on which insurance was not obtained or
obtainable) shall result in damage to or
loss or destruction of the Property,
Grantor shall give immediate notice
thereof to the Noteholder and, unless
otherwise so instructed by the
Noteholder, Grantor shall promptly, at
Grantor's sole cost and expense and
regardless of whether the insurance
proceeds, if any, shall be made
available to Grantor (after
reimbursement of the Noteholder or the
Trustee for all costs and expenses,
including reasonable attorneys' fees, if
any, incurred in connection with the
collection of such proceeds) or
regardless of whether the insurance
proceeds, if any, shall be sufficient
for the purpose, restore, repair,
replace and rebuild the Property as
nearly as possible to its value,
condition and character immediately
prior to such damage, loss or
destruction in accordance with plans and
specifications submitted to and approved
by the Noteholder and otherwise in
accordance with the provisions of this
Mortgage.
(i) CONDEMNATION. Immediately upon
obtaining knowledge of the
institution of any proceedings for the
condemnation of the Property or any portion
thereof, or any other proceedings arising out
of injury or damage to the Property, or any
portion thereof, Grantor will notify the
Noteholder of the pendency of such
proceedings. The Noteholder may participate
in any such proceedings, and Grantor shall
from time to time deliver to the Noteholder
all instruments requested by it to permit
such participation. Grantor shall, at its
expense, diligently prosecute any such
proceedings, and shall consult with the
Noteholder, its attorneys and experts, and
cooperate with them in the carrying on or
defense of any such proceedings. All proceeds
of condemnation awards or proceeds of sale in
lieu of condemnation with respect to the
Property and all judgments, decrees and
awards for injury or damage to the Property
shall be paid to the Noteholder and shall be
applied as follows:
(i) first, to reimburse the
Noteholder or the Trustee for all costs
and expenses, including reasonable
attorney's fees, incurred in connection
with collection of such proceeds; and
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(ii) second, the remainder of said
proceeds shall be applied, at the
discretion of the Noteholder, to the
payment (without premium or penalty
unless such are otherwise payable under
the Note due to acceleration or
otherwise) of the secured indebtedness
in the order determined by the
Noteholder in its sole discretion or
paid out to repair or restore the
Property so affected by such
condemnation, injury or damage in the
same manner as provided in subparagraph
(h) of this Paragraph 2.2. In any event,
notwithstanding such condemnation, the
unpaid portion of the secured
indebtedness shall remain in full force
and effect (except to the extent of
application of condemnation proceeds as
provided above) and Grantor shall not be
excused in the payment thereof. Provided
the Noteholder consents to the use of
the proceeds to pay for the cost of
repair, restoration or replacement of
the Property, Grantor shall promptly
commence and complete such repair,
restoration or replacement of the
Property as nearly as possible to its
value, condition and character
immediately prior to such damage or
taking in accordance with plans and
specifications submitted to and approved
by the Noteholder and otherwise in
accordance with the provisions of this
Mortgage. Grantor hereby assigns and
transfers all such proceeds, judgments,
decrees and awards to the Noteholder and
agrees to execute such further
assignments of all such proceeds,
judgments, decrees and awards as the
Noteholder may request. The Noteholder
is hereby authorized, in the name of
Grantor, to execute and deliver valid
acquittances for, and to appeal from,
any such judgment, decree or award. The
Noteholder shall not be, in any event or
circumstances, liable or responsible for
failure to collect, or exercise
diligence in the collection of, any such
proceeds, judgments, decrees or awards.
(j) PROTECTION AND DEFENSE OF LIEN. If
the validity or priority of this Mortgage or
of any rights, titles, liens or security
interests created or evidenced hereby with
respect to the Property or any part thereof
shall be endangered or questioned or shall be
attacked directly or indirectly or if any
legal proceedings are instituted against
Grantor with respect thereto, Grantor will
give prompt written notice thereof to the
Noteholder and at Grantor's own cost and
expense will diligently endeavor to cure any
defect that may be developed or claimed, and
will take all necessary and proper steps for
the defense of such legal proceedings,
including but not limited to the employment
of counsel, the prosecution or defense of
litigation and the release or discharge of
all adverse claims, and the Trustee and the
Noteholder, or either of them (whether or not
named as parties to legal proceedings with
respect thereto) are hereby authorized and
empowered to take such additional steps as in
their judgment and discretion may be
necessary or proper for the defense of any
such legal proceedings or the protection of
the validity or priority of this Mortgage and
the rights, titles, liens and security
interests created or evidenced hereby,
including but not limited to the employment
of counsel, the prosecution
13
or defense of litigation, the compromise or
discharge of any adverse claims made with
respect to the Property (unless Grantor
notifies the Noteholder in writing that
Grantor disputes such claim which is the
subject matter of such compromise or
discharge in which event Grantor shall
immediately furnish to the Noteholder a
sufficient bond or other adequate security,
as reasonably required by the Noteholder,
while such claim is being disputed and
Grantor shall pursue such claim with due
diligence), the purchase of any tax title and
the removal of prior liens or security
interests (including but not limited to the
payment of debts as they mature or the
payment in full of matured or nonmatured
debts, which are secured by these prior liens
or security interests), and all expenses so
incurred of every kind and character shall be
a demand obligation owing by Grantor and the
party incurring such expenses shall be
subrogated to all rights of the person
receiving such payment.
(k) NO OTHER LIENS. Grantor will not,
without the prior written consent of the
Noteholder, create, place or permit to be
created or placed, or through any act or
failure to act, acquiesce in the placing of,
or allow to remain, any deed of trust,
mortgage, voluntary or involuntary lien,
whether statutory, constitutional or
contractual (except for the lien for ad
valorem taxes on the Property which are not
delinquent), security interest, encumbrance
or charge, or conditional sale or other title
retention document, against or covering the
Property, or any part thereof, other than the
Permitted Encumbrances, regardless of whether
the same are expressly or otherwise
subordinate to the lien or security interest
created in this Mortgage, and should any of
the foregoing become attached hereafter in
any manner to any part of the Property
without the prior written consent of the
Noteholder, Grantor will cause the same to be
promptly discharged and released. Grantor
will own all parts of the Property and will
not acquire any fixtures, equipment or other
Property forming a part of the Properly
pursuant to a lease, license or similar
agreement, in excess of $25,000 in the
aggregate, without the prior written consent
of the Noteholder.
(l) BOOKS AND RECORDS. Grantor will keep
accurate books and records in accordance with
sound accounting principles in which full,
true and correct entries shall be promptly
made as to all operations on the Property,
and will permit all such books and records
(including without limitation all contracts,
statements, invoices, bills and claims for
labor, materials and services supplied for
the construction and operation of the
improvements forming a part of the Property)
to be inspected by the Noteholder and its
duly accredited representatives at all times
during reasonable business hours.
(m) FINANCIAL STATEMENTS AND REPORTS:
RENT ROLL. Grantor will deliver to the
Noteholder, within one hundred twenty (120)
days after the close of each fiscal year of
Grantor, a statement of condition or balance
sheet of Grantor as at the end of such fiscal
year. Grantor will deliver to the Noteholder,
within one hundred twenty (120) days after
the close of the fiscal year of each
guarantor of the indebtedness secured hereby,
a statement of
14
condition or balance sheet of such guarantor
as at the end of such fiscal year. Grantor
will deliver to the Noteholder, within thirty
(30) days after the close of each calendar
month, an operating statement showing in
reasonable detail all income and expenses of
Grantor with respect to the Property during
such month and for the fiscal year through
the end of such month. Said statements of
condition, balance sheets and operating
statements shall be in scope and detail
reasonably satisfactory to the Noteholder and
shall be prepared and certified as to
accuracy by an independent certified public
accountant or representative of Grantor
acceptable to the Noteholder. Grantor will
deliver to the Noteholder, within thirty (30)
days after the close of each calendar quarter
of Grantor, a rent roll of the Property
containing the name and address of all
Tenants then occupying portions of the
Property under valid and subsisting Leases
and, with respect to each of such Leases, the
rentals payable, square footage of the leased
or occupied premises, amount of security
deposit, lease commencement date, lease
expiration date, date through which rent is
paid and the nature and extent of any
material defaults by tenant, all certified as
to accuracy by a representative of Grantor
acceptable to the Noteholder. If, and as
often as, reasonably requested by the
Noteholder, Grantor will make further reports
of operations in such form as the Noteholder
reasonably prescribes, setting out full data
as reasonably requested by the Noteholder.
(n) ESCROW. In order to secure the
performance and discharge of Grantor's
obligations under subparagraphs (f) and (h)
of this Paragraph 2.2, but not in lieu of
such obligations, Grantor will deposit with
the Noteholder, concurrently with the
execution and delivery of this Mortgage, a
sum equal to ad valorem taxes, assessments
and charges (which charges for the purpose of
this paragraph shall include without
limitation ground rents and water and sewer
rents and any other recurring charge which
could create or result in a lien against the
Property) against the Property for the
current year and the premiums for such
policies of insurance for the current year,
all as estimated by the Noteholder and
prorated to the end of the calendar month
following the month during which this
Mortgage is executed and delivered, and
thereafter will deposit with the Noteholder,
on each date when an installment of principal
and/or interest is due on the Note,
sufficient funds (as estimated from time to
time by the Noteholder) to permit the
Noteholder to pay, at least fifteen (15) days
prior to the due date thereof, the next
maturing ad valorem taxes, assessments and
charges and premiums for such policies of
insurance. If any such escrow funds are not
paid to the Noteholder within ten (10) days
from the date same shall become due, Grantor
shall pay a late or collection charge equal
to the lesser of (a) the maximum lawful rate
as permitted by applicable law (as such term
is defined in Section 5.15 hereof), or (b)
five percent (5%) of the unpaid escrow
amount. The Noteholder shall have the right
to rely upon tax information furnished by
applicable taxing authorities in the payment
of such taxes or assessments and shall have
no obligation to make any protest of any such
taxes or assessments. Any excess over the
amounts required for such purposes shall be
held by the Noteholder for future use or
refunded to Grantor,
15
at the Noteholder's option; and any
deficiency in such funds so deposited shall
be made up by Grantor upon demand of the
Noteholder. All such funds so deposited shall
not bear interest, may be mingled with the
general funds of the Noteholder and shall be
applied by the Noteholder toward the payment
of such taxes, assessments, charges and
premiums when statements therefor are
presented to the Noteholder by Grantor (which
statements shall be presented by Grantor to
the Noteholder a reasonable time before the
applicable amount is due) ; provided,
however, that, if a default shall have
occurred hereunder, such funds may at the
Noteholder's option be applied to the payment
of the secured indebtedness in the order
determined by the Noteholder in its sole
discretion, and that the Noteholder may at
any time, in its discretion, apply all or any
part of such funds (including accrued
interest thereon) toward the payment of any
such taxes, assessments, charges or premiums
which are past due, together with any
penalties or late charges with respect
thereto. The conveyance or transfer of
Grantor's interest in the Property for any
reason (including without limitation the
foreclosure of a subordinate lien or security
interest or a transfer by operation of law)
shall constitute an assignment or transfer of
Grantor's interest in and rights to such
funds held by the Noteholder under this
subparagraph (n) but subject to the rights of
the Noteholder hereunder.
(o) FURTHER ASSURANCES. Grantor will, on
request of the Noteholder, (i) promptly
correct any defect, error or omission which
may be discovered in the contents of this
Mortgage or in any other instrument executed
in connection herewith or in the execution or
acknowledgment thereof; (ii) execute,
acknowledge, deliver and record or file such
further instruments (including without
limitation further deeds of trust, security
agreements, financing statements,
continuation statements and assignments of
rents or leases) and do such further acts as
may be reasonably necessary or proper to
carry out more effectively the purposes of
this Mortgage and such other instruments and
to subject to the liens and security
interests hereof and thereof any property
intended by the terms hereof and thereof to
be covered hereby and thereby including
specifically, but without limitation, any
renewals, additions, substitutions,
replacements or appurtenances to the
Property; (iii) execute, acknowledge,
deliver, procure and record or file any
document or instrument (including
specifically any financing statement)
reasonably required by the Noteholder to
protect the lien or the security interest
hereunder against the rights or interests of
third persons; and (iv) provide such
certificates, documents, reports,
information, affidavits and other instruments
and do such further acts as may be necessary
proper in the reasonable determination of the
Noteholder to enable the Noteholder to comply
with the requirements or requests of any
agency having jurisdiction over the
Noteholder or any examiners of such agencies
with respect to the indebtedness secured
hereby, Grantor or the Property; and Grantor
will pay all costs connected with any of the
foregoing.
16
(p) FEES AND EXPENSES; INDEMNIFICATION.
Grantor will pay all actual appraisal fees,
filing and recording fees, inspection fees,
survey fees, taxes, brokerage fees and
commissions, abstract fees, title policy
fees, uniform commercial code search fees,
escrow fees, reasonable attorney's fees and
all other reasonable and actual costs and
expenses of every character incurred by
Grantor or the Noteholder in connection with
the loan evidenced by the Note, either at the
closing thereof or at any time during the
term thereof, or otherwise attributable or
chargeable to Grantor as owner of the
Property, and will reimburse the Noteholder
for all such costs and expenses incurred by
it as set forth herein. Grantor shall pay all
expenses and reimburse the Noteholder for any
expenditures, including reasonable attorney's
fees and legal expenses, incurred or expended
in connection with (i) the breach by Grantor
of any covenant herein or in any other
instrument securing the payment of the Note,
(ii) the Noteholder's exercise of any of its
rights and remedies hereunder or under the
Note or any other instrument securing the
payment of the Note or the Noteholder's
protection of the Property and its lien and
security interest therein, or (iii) any
amendments to this Mortgage, the Note or any
other Loan Document or any matter requested
by Grantor or any approval required
hereunder. Grantor will indemnify and hold
harmless the Trustee and the Noteholder (for
purposes of this paragraph, the terms "the
Trustee" and "the Noteholder" shall include
any financial institution or entity or person
owning all or part of the Note and the
directors, officers, partners, employees and
agents of the Trustee and the Noteholder,
respectively, and any persons or entities
owned or controlled by, owning or
controlling, or under common control or
affiliated with the Trustee and the
Noteholder, respectively) from and against,
and reimburse them for, all claims, demands,
liabilities, losses, damages, causes of
action, judgments, penalties, costs and
expenses (including, without limitation,
reasonable attorney's fees) which may be
imposed upon or incurred or paid by them by
reason of, on account of or in connection
with any bodily injury or death or property
damage occurring in or upon or in the
vicinity of the Property through any cause
whatsoever or asserted against them on
account of any act performed or omitted to be
performed hereunder or on account of any
transaction arising out of or in any way
connected with the Property or with this
Mortgage, the Note or any other instrument
securing the payment of the Note. WITHOUT
LIMITATION, IT IS THE INTENTION OF GRANTOR
AND GRANTOR AGREES THAT THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED
PARTY WITH RESPECT TO CLAIMS, DEMANDS,
LIABILITIES, LOSSES, DAMAGES, CAUSES OF
ACTION, JUDGMENTS, PENALTIES, COSTS AND
EXPENSES (INCLUDING WITHOUT LIMITATION,
REASONABLE ATTORNEY'S FEES) WHICH IN WHOLE OR
IN PART ARE CAUSED BY OR ARISE OUT OF THE
NEGLIGENCE OF SUCH (AND/OR ANY OTHER)
INDEMNIFIED PARTY; PROVIDED, HOWEVER, SUCH
INDEMNITIES SHALL NOT APPLY TO ANY
INDEMNIFIED PARTY TO THE EXTENT THE
SUBJECT OF THE INDEMNIFICATION IS CAUSED BY
OR ARISES OUT OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH
17
INDEMNIFIED PARTY. The foregoing indemnities
shall not terminate upon release, foreclosure
or other termination of this Mortgage but
will survive foreclosure of this Mortgage or
conveyance in lieu of foreclosure and the
repayment of the secured indebtedness and the
discharge and release of this Mortgage and
the other documents evidencing and/or
securing the secured indebtedness. Any amount
to be paid under this subparagraph by Grantor
to the Noteholder and/or the Trustee shall be
a demand obligation owing by Grantor to the
Noteholder and/or the Trustee and shall be
subject to and governed by the provisions of
Paragraph 2.3 hereof.
(q) LIABILITY INSURANCE. Grantor shall
maintain Comprehensive General Liability
insurance against claims for bodily injury or
death and property damage occurring in or
upon or resulting from the Property, in
standard form and with such insurance company
or companies as may be reasonably acceptable
to the Noteholder, such insurance to afford
immediate protection, in amounts reasonably
acceptable to the Noteholder. Such
Comprehensive General Liability insurance
shall include Blanket Contractual Liability
coverage which insures contractual liability
under the indemnifications of the Noteholder
and the Trustee by Grantor set forth in this
Mortgage (but such coverage or the amount
thereof shall in no way limit such
indemnifications). Grantor shall maintain
with respect to each policy or agreement
evidencing such Comprehensive General
Liability insurance such endorsements as may
be reasonably required by the Noteholder and
shall at all times deliver and maintain with
the Noteholder a certificate with respect to
such insurance in form satisfactory to the
Noteholder not less than fifteen (15) days
prior to the expiration date of each policy
of insurance required of Grantor pursuant to
this subparagraph 2.2(q), Grantor shall
deliver to the Noteholder an original
certificate evidencing a renewal policy or
policies and accompanied by evidence of
payment reasonably satisfactory to the
Noteholder. In the event of a foreclosure of
this Mortgage, the purchaser of the Property
shall succeed to all the rights of Grantor,
including any right to unearned premiums, in
and to all policies of insurance assigned
pursuant to the provisions of this
subparagraph, and Grantor hereby authorizes
the Noteholder to notify any or all insurance
carriers of this assignment.
(r) TAX ON LIEN. In the event of the
enactment after this date of any law of the
State of Texas or of any other governmental
entity deducting from the value of property
for the purpose of taxation any lien or
security interest thereon, or imposing upon
the Noteholder the payment of the whole or
any part of the taxes or assessments or
charges or liens herein required to be paid
by Grantor, or changing in any way the laws
relating to the taxation of deeds of trust or
mortgages or security agreements or debts
secured by deeds of trust or mortgages or
security agreements or the interest of the
mortgagee or secured party in the property
covered thereby, or the manner of collection
of such taxes,
so as to affect this Mortgage or the
indebtedness secured hereby or the
18
Noteholder, then, and in any such event,
Grantor, upon demand by the Noteholder, shall
pay such taxes, assessments, charges or
liens, or reimburse the Noteholder therefor;
provided, however, that if in the opinion of
counsel for the
Noteholder (i) it might be unlawful to
require Grantor to make such payment or (ii)
the making of such payment might result in
the imposition of interest beyond the maximum
amount permitted by law, then and in such
event, the Noteholder may elect, by notice in
writing given to Grantor, to declare all of
the indebtedness secured hereby to be and
become due and payable ninety (90) days from
the giving of such notice.
(s) CHANGE OF NAME. IDENTITY OR
STRUCTURE. Grantor will not change Grantor's
name, identity (including its trade name or
names) or, if not an individual, Grantor's
corporate, partnership or other structure
without notifying the Noteholder of such
change in writing at least thirty (30) days
prior to the effective date of such change.
Grantor will execute and deliver to the
Noteholder, prior to or contemporaneously
with the effective date of any such change,
any financing statement or financing
statement change required by the Noteholder
to establish or maintain the validity,
perfection and priority of the security
interest granted herein. At the request of
the Noteholder, Grantor shall execute a
certificate in form satisfactory to the
Noteholder listing the trade names under
which Grantor intends to operate the
Property, and representing and warranting
that Grantor does business under no other
trade name with respect to the Property.
(t) LOCATION AND USE OF COLLATERAL. All
tangible Collateral will be used in the
business of Grantor and shall remain in
Grantor's possession or control at all times
at Grantor's risk of loss and shall be
located on the real property described in
Exhibit A hereto.
(u) ESTOPPEL CERTIFCATE. Grantor shall
at any time and from time to time, but not
more than twice in any calendar year, furnish
promptly upon request by the Noteholder a
written statement in such form as may be
required by the Noteholder stating that the
Note, this Mortgage and the other instruments
securing the payment of the Note are valid
and binding obligations of Grantor,
enforceable against Grantor in accordance
with their terms; the unpaid principal
balance of the Note; the date to which
interest on the Note is paid; that the Note,
this Mortgage and the other instruments
securing the payment of the Note have not
been released, subordinated or modified; and
that there are no offsets or defenses against
the enforcement of the Note, this Mortgage or
any other instrument securing the payment of
the Note, or if any of the foregoing
statements are untrue, specifying the reasons
therefor.
19
(v) PROCEEDS OF COLLATERAL. Grantor
shall account fully and faithfully for and,
if the Noteholder so elects, shall promptly
pay or turn over to the Noteholder the
proceeds in whatever form received from
disposition in any manner of any of the
Collateral, except as otherwise specifically
authorized herein. Grantor shall at all times
keep the Collateral and its proceeds separate
and distinct from other property of Grantor
and shall keep accurate and complete records
of the Collateral and its proceeds.
(w) LOAN AGREEMENT. Grantor will
punctually perform and discharge each and
every obligation and undertaking of Grantor
under the Construction Loan Agreement of even
date herewith, as from time to time amended
or restated, (herein called the "LOAN
AGREEMENT") between Grantor and the
Noteholder and will not permit a default to
occur thereunder.
(x) PERMITTED ENCUMBRANCES. Grantor will
comply with and will perform all of the
covenants, agreements and obligations imposed
upon it or the Property in the Permitted
Encumbrances in accordance with their
respective terms and provisions. Grantor will
not modify or permit any modification of any
Permitted Encumbrance, without the prior
written consent of the Noteholder.
(y) ENVIRONMENTAL. Grantor will not
cause or permit the Property or Grantor to be
in violation of, or do anything or permit
anything to be done which will subject the
Property to any remedial obligations under,
any Applicable Environmental Laws, including
without limitation CERCLA, RCRA, the Texas
Water Code and the Texas Solid Waste Disposal
Act, assuming disclosure to the applicable
governmental authorities of all relevant
facts, conditions and circumstances, if any,
pertaining to the Property and Grantor and
Grantor will promptly notify the Noteholder
in writing of any existing, pending or, to
the best knowledge of Grantor, threatened
investigation or inquiry by any governmental
authority in connection with any Applicable
Environmental Laws. Grantor shall obtain any
permits, licenses or similar authorizations
to construct, occupy, operate or use any
buildings, improvements, fixtures and
equipment forming a part of the Property by
reason of any Applicable Environmental Laws.
Grantor shall take all steps necessary to
determine that no hazardous substances or
solid wastes are being disposed of or
otherwise released on or to the Property.
Grantor will not cause or permit the disposal
or other release of any hazardous substance
or solid waste on or to the Property and
covenants and agrees to keep or cause the
Property to be kept free of any hazardous
substance or solid waste and to remove the
same (or if removal is prohibited by law, to
take whatever action is required by law)
promptly upon discovery at its sole expense;
provided, however, Grantor shall be permitted
to keep small quantities of hazardous
substances on the Property which are utilized
by Grantor in the ordinary course of
Grantor's business, in full compliance with
Applicable Environmental Laws. Without
limitation of the Noteholder's rights to
declare a default hereunder and to exercise
all remedies
20
available by reason thereof, in the event
Grantor fails to comply with or perform any
of the foregoing covenants and obligations,
the Noteholder may (without any obligation,
express or implied) remove any hazardous
substance or solid waste from the Property
(or if removal is prohibited by law, take
whatever action is required by law) and the
cost of the removal or such other action
shall be a demand obligation owing by Grantor
to the Noteholder pursuant to this Mortgage
and shall be subject to and covered by the
provisions of Paragraph 2.3 hereof. In the
event Grantor fails to comply with or perform
any of the foregoing covenants and
obligations, Grantor grants to the Noteholder
and its agents, employees, contractors and
consultants access to the Property and the
license (which is coupled with an interest
and irrevocable while this Mortgage is in
effect) to remove the hazardous substance or
solid waste (or if removal is prohibited by
law, to take whatever action is required by
law). Upon the Noteholder' s reasonable
request, but only if the Noteholder has
reason to believe there is a violation of
Applicable Environmental Laws, at any time
and from time to time during the existence of
this Mortgage, Grantor will provide at
Grantor's sole expense an inspection or audit
of the Property from an engineering or
consulting firm approved by the Noteholder,
indicating the presence or absence of
hazardous substances and solid wastes on the
Property. If Grantor fails to provide same
after thirty (30) days' notice (or such
additional time, not to exceed an additional
thirty (30) days, if Grantor is diligently
pursuing obtaining such report or audit), the
Noteholder may order same, and Grantor grants
to the Noteholder and its agents, employees,
contractors and consultants access to the
Property and a license (which is coupled with
an interest and irrevocable while this
Mortgage is in effect) to perform inspections
and tests. The cost of such inspections and
tests shall be a demand obligation owing by
Grantor to the Noteholder pursuant to this
Mortgage and shall be subject to and covered
by the provisions of Paragraph 2.3 hereof.
(z) ASBESTOS. Grantor has informed the
Noteholder that certain portions of the
Property contain asbestos or material
containing asbestos which is or may become
friable or material containing asbestos
deemed hazardous by Applicable Environmental
Laws. Grantor will remove the same or take
whatever action is required by law by
implementing an operation and maintenance
program (the "O & M PROGRAM"), acceptable to
the Noteholder, at Grantor's sole expense,
not later than March 31,1997. Without
limitation of the Noteholder's rights to
declare an event of default hereunder and to
exercise all remedies available by reason
thereof, in the event Grantor fails to comply
with or perform any of the foregoing
covenants and obligations, the Noteholder may
(without any obligation, express or implied)
remove such asbestos or material containing
asbestos (or if removal is prohibited by law,
take whatever action is required by law
including without limitation implementing the
O & M Program) and the cost of removal or
such other action shall be a demand
obligation owing by Grantor to the Noteholder
pursuant to this Mortgage and shall be
subject to and covered by the provisions of
Paragraph 2.3 hereof. Grantor grants to the
Noteholder and its agents, employees,
contractors and
21
consultants access to the Property and a
license (which is coupled with an interest
and irrevocable while this Mortgage is in
effect) to remove such asbestos or materials
containing asbestos or take whatever action
is required by law, including without
limitation, implementing the O & M Program.
Upon the Noteholder's reasonable request, at
any time and from time to time during the
existence of this Mortgage, Grantor shall
provide, at Grantor's sole expense, an
inspection or audit of the Property from an
engineering or consulting firm approved by
the Noteholder, evidencing the implementation
of and compliance with the O & M Program. If
Grantor fails to provide same after ten (10)
days' notice, the Noteholder may order same,
and Grantor grants to the Noteholder and its
agents, employees, contractors and
consultants access to the Property and a
license (which is coupled with an interest
and irrevocable while this Mortgage is in
effect) to perform inspections and tests. The
cost of such inspections and tests shall be a
demand obligation owing by Grantor to the
Noteholder pursuant to this Mortgage and
shall be subject to and covered by the
provisions of Paragraph 2.3 hereof.
2.3. RIGHT OF THE NOTEHOLDER TO PERFORM.
Grantor agrees that, if Grantor fails to
perform any act or to take any action which
hereunder Grantor is required to perform or
take, or to pay any money which hereunder
Grantor is required to pay, or takes any
action prohibited hereby, the Noteholder, in
Grantor's name or in its own name, may after
notice to Grantor as may be set forth herein,
but shall not be obligated to perform or
cause to be performed such act or take such
action or pay such money or remedy any action
so taken, and any expenses so incurred by the
Noteholder, and any money paid by the
Noteholder in connection therewith, shall be
a demand obligation owing by Grantor to the
Noteholder and the Noteholder, upon making
such payment, shall be subrogated to all of
the rights of the person, corporation or body
politic receiving such payment. Any amounts
due and owing by Grantor to the Noteholder
pursuant to this Mortgage shall bear interest
from the date such amount becomes due until
paid at the rate of interest payable on
matured but unpaid principal of or interest
on the Note and shall be a part of the
secured indebtedness and shall be secured by
this Mortgage and by any other instrument
securing the secured indebtedness.
2.4. INDEMNIFICATION REAARDING
ENVIRONMENTAL MATTERS. Grantor agrees to
indemnify and hold the Noteholder and the
Trustee (for purposes of this paragraph, the
terms "the Noteholder" and "the Trustee"
shall include the directors, officers,
partners, employees and agents of the
Noteholder and the Trustee, respectively, and
any persons or entities owned or controlled
by, owning or controlling, or under common
control or affiliated with the Noteholder and
the Trustee respectively) harmless from and
against, and to reimburse the Noteholder and
the Trustee with respect to, any and all
claims, demands, losses, damages (including
consequential damages), liabilities, causes
of action, judgments, penalties, costs and
expenses (including attorneys' fees and court
costs) of any and every kind or character,
known or unknown,
22
fixed or contingent, imposed on, asserted
against or incurred by the Noteholder and/or
the Trustee at any time and from time to time
by reason of, in connection with or arising
out of (a) the breach of any representation
or warranty of Grantor as set forth herein
regarding asbestos, material containing
asbestos or Applicable Environmental Laws,
(b) the failure of Grantor to perform any
obligation herein required to be performed by
Grantor regarding asbestos, material
containing asbestos or Applicable
Environmental Laws, (c) any violation on or
before the Release Date (as hereinafter
defined) of any Applicable Environmental Law
in effect on or before the Release Date, (d)
the removal of hazardous substances or solid
wastes from the Properly (or if removal is
prohibited by law, the taking of whatever
action is required by law), (e) the
implementation of the O & M Program, (f) any
act, omission, event or circumstance existing
or occurring on or prior to the Release Date
(including without limitation the presence on
the Property or release from the Property of
hazardous substances or solid wastes disposed
of or otherwise released on or prior to the
Release Date), resulting from or in
connection with the ownership, construction,
occupancy, operation, use and/or maintenance
of the Property, regardless of whether the
act, omission, event or circumstance
constituted a violation of any Applicable
Environmental Law at the time of its
existence or occurrence, and (g) any and all
claims or proceedings (whether brought by
private party or governmental agency) for
bodily injury, property damage, abatement or
remediation, environmental damage or
impairment or any other injury or damage
resulting from or relating to any hazardous
substance or solid waste located upon or
migrating into, from or through the Property
(whether or not any or all of the foregoing
was caused by Grantor or its Tenants or
subtenants, or a prior owner of the Property
or its Tenants or subtenants, or any third
party and whether or not the alleged
liability is attributable to the handling,
storage, generation, transportation or
disposal of such substance or waste or the
mere presence of such substance or waste on
the Property). WITHOUT LIMITATION, THE
FOREGOING INDEMNITIES SHALL APPLY TO EACH
INDEMNIFIED PARTY WITH RESPECT TO CLAIMS,
DEMANDS, LOSSES, DAMAGES (INCLUDING
CONSEQUENTIAL DAMAGES), LIABILITIES, CAUSES
OF ACTION, JUDGMENTS, PENALTIES, COSTS AND
EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT
COSTS) WHICH IN WHOLE OR IN PART ARE CAUSED
BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
(AND/OR ANY OTHER) INDEMNIFIED PARTY.
HOWEVER, SUCH INDEMNITIES SHALL NOTAPPLYTO
ANY INDEMNIFIED PARTY TO THE EXTENT THE
SUBJECT OF THE INDEMNIFICATION IS CAUSED BY
OR ARISES OUT OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY.
The "Release Date" as used herein shall mean
the earlier of the following two dates: (i)
the date on which the indebtedness and
obligations secured hereby have been paid and
performed in full and this Mortgage has been
released, or (ii) the date on which the lien
of this Mortgage is foreclosed or a
conveyance by deed in lieu of such
foreclosure is fully effective; provided, if
such payment, performance, release,
foreclosure or conveyance is challenged, in
23
bankruptcy proceedings or otherwise, the
Release Date shall be deemed not to have
occurred until such challenge is rejected,
dismissed or withdrawn with prejudice. The
foregoing indemnities shall not terminate
upon the Release Date or upon the release,
foreclosure or other termination of this
Mortgage but will survive the Release Date,
foreclosure of this Mortgage or conveyance in
lieu of foreclosure, and the repayment of the
secured indebtedness and the discharge and
release of this Mortgage and the other
documents evidencing and/or securing the
secured indebtedness. Any amount to be paid
under this Paragraph by Grantor to the
Noteholder and/or the Trustee shall be a
demand obligation owing by Grantor to the
Noteholder and/or the Trustee and shall be
subject to and covered by the provisions of
Paragraph 2.3 hereof. Nothing in this
paragraph, elsewhere in this Mortgage or in
any other document evidencing, securing or
relating to the indebtedness secured hereby
shall limit or impair any rights or remedies
of the Noteholder and/or the Trustee against
Grantor or any third party under Applicable
Environmental Laws, including without
limitation any rights of contribution or
indemnification available thereunder.
ARTICLE 3
ASSIGNMENT OF RENTS
3.1 ASSIGNMENT. In order to provide a
source of future payment of the indebtedness
secured hereby, Grantor does hereby
absolutely and unconditionally assign,
transfer and set over to the Noteholder all
of the rents, income, receipts, revenues,
issues, profits and other sums of money
(hereinafter collectively called the "RENT")
that are now or at any time hereafter become
due and payable to Grantor under the terms of
any leases, licenses, rental contracts and
other agreements relating to occupancy
(hereinafter called the "LEASES"), now or
hereafter covering or affecting the Property,
or any part thereof, or arising or issuing
from or out of the Leases or from or out of
the Property or any part thereof, including
but not limited to minimum rents, additional
rents, percentage rents, deficiency rents and
liquidated damages following default,
security deposits, advance rents, all
proceeds payable under any policy of
insurance covering loss of rents resulting
from untenantability caused by destruction or
damage to the Property, and all of Grantor's
rights to recover monetary amounts from any
lessee in bankruptcy including, without
limitation, rights of recovery for use and
occupancy and damage claims arising out of
lease defaults, including rejections, under
any applicable Bankruptcy Law (as hereinafter
defined), including specifically the
immediate and continuing right to collect and
receive each and all of the foregoing. Until
receipt from the Noteholder of notice of the
occurrence of a default specified in this
Mortgage (hereinafter called a "NOTICE OF
DEFAULT"), each lessee under the Leases shall
pay Rent directly to Grantor and Grantor
shall have the right to receive such Rent
provided that Grantor shall hold such Rent as
a trust fund to be applied as required by the
Noteholder and Grantor hereby covenants so to
apply the Rent, before using any part of the
same for any other purposes,
24
first, to the payment of taxes and
assessments upon the Property before penalty
or interest is due thereon; second, to the
cost of insurance, maintenance and repairs
required by the terms of this Mortgage;
third, to the satisfaction of all obligations
specifically set forth in the Leases; and,
fourth, to the payment of interest and
principal becoming due on the Note and this
Mortgage. Upon receipt from the Noteholder of
a Notice of Default, each lessee under the
Leases is hereby authorized and directed to
pay directly to the Noteholder all Rent
thereafter accruing and the receipt of Rent
by the Noteholder shall be a release of such
lessee to the extent of all amounts so paid.
The receipt by a lessee under the Leases of a
Notice of Default shall be sufficient
authorization for such lessee to make all
future payments of Rent directly to the
Noteholder and each such lessee shall be
entitled to rely on such Notice of Default
and shall have no liability to Grantor for
any Rent paid to the Noteholder after receipt
of such Notice of Default. Rent so received
by the Noteholder for any period prior to
foreclosure under this Mortgage or acceptance
of a deed in lieu of such foreclosure shall
be applied by the Noteholder to the payment
(in such order as the Noteholder shall
determine) of: (a) all expenses of managing
the Property, including but not limited to
the salaries, fees and wages to a managing
agent and such other employees as the
Noteholder may deem necessary or desirable;
all expenses of operating and maintaining the
Property, including but not limited to all
taxes, assessments, charges, claims, utility
costs and premiums for insurance, and the
cost of all alterations, renovations, repairs
or replacements; and all expenses incident to
taking and retaining possession of the
Property and/or collecting the Rent due and
payable under the Leases; and (b) the Note
and other indebtedness secured by this
Mortgage, principal, interest, attorneys' and
collection fees and other amounts, in such
order as the Noteholder in its sole
discretion may determine. In no event will
the assignment pursuant to this Paragraph
reduce the indebtedness evidenced by the Note
or otherwise secured by this Mortgage, except
to the extent, if any, that Rent is actually
received by the Noteholder and applied upon
or after said receipt to such indebtedness in
accordance with the preceding sentence.
Without impairing its rights hereunder, the
Noteholder may, at its option, at any time
and from time to time, release
to Grantor Rent so received by the Noteholder
or any part thereof. As between Grantor and
the Noteholder, and any person claiming
through or under Grantor, other than any
lessee under the Leases who has not received
a Notice of Default pursuant to this
Paragraph, the assignment contained in this
Paragraph is intended to be absolute,
unconditional and presently effective and the
provisions of this Paragraph for notification
of lessees under the Leases upon the
occurrence of a default specified in this
Mortgage are intended solely for the benefit
of each such lessee and shall never inure to
the benefit of Grantor or any person claiming
through or under Grantor, other than a lessee
who has not received such notice. It shall
never be necessary for the Noteholder to
institute legal proceedings of any kind
whatsoever to enforce the provisions of this
Paragraph. At any time during which Grantor
is receiving Rent directly from lessees under
the Leases, Grantor shall, upon receipt of
written direction from the Noteholder, make
demand and/or xxx for all Rent due and
payable under one
25
or more Leases, as directed by the
Noteholder, as it becomes due and payable,
including Rent which is past due and unpaid.
In the event Grantor fails to take such
action, or at any time during which Grantor
is not receiving Rent directly from lessees
under the Leases, the Noteholder shall have
the right (but shall be under no duty) to
demand, collect and xxx for, in its own name
or in the name of Grantor, all Rent due and
payable under the Leases, as it becomes due
and payable, including Rent which is past due
and unpaid. The Noteholder shall not be
deemed to have taken possession of the
Property except on the exercise of its option
to do so, evidenced by its demand and overt
act for such purpose. Grantor shall make no
assignment or other disposition of the Rent,
nor shall Grantor cancel or amend any Lease
or any other instrument under which Rent is
to be paid or waive, excuse, condone,
discount, set off, compromise or in any
manner release any obligation thereunder, nor
shall Grantor receive or collect any Rent for
a period of more than one month in advance of
the date on which payment thereof is due and
Grantor shall duly and punctually observe and
perform every obligation to be performed by
it under each Lease, and shall not do or
permit to be done anything to impair the
security thereof and shall enforce, to the
extent such enforcement would be reasonably
prudent under the circumstances, every
obligation of each other party thereto. The
assignment contained in this Paragraph 3.1
shall terminate upon the release of this
Mortgage but no lessee under the Leases shall
be required to take notice of such
termination until a copy of a release of this
Mortgage shall have been delivered to such
lessee.
3.2 CONTROLLING PROVISION.
Contemporaneously with the execution of this
Mortgage, Grantor is executing an Assignment
of Leases and Rents (herein so called) in
favor of the Noteholder. To the extent any
provision of Paragraph 3.1 above is construed
to contradict, conflict with or be
inconsistent with any term, condition or
provision contained in the Assignment of
Leases and Rents, the applicable terms,
conditions and provisions of the Assignment
of Leases and Rents shall supersede such
contradicting, conflicting or inconsistent
provisions of paragraph 3.1 and shall
control.
ARTICLE 4
REMEDIES IN EVENT OF
DEFAULT
4.1 DEFAULTS. The term "default" as used
in this Mortgage shall mean the occurrence of
any of the following events:
(a) the failure of Grantor to make due
and punctual payment of the Note or of any
other secured indebtedness or of any
installment of principal thereof or interest
thereon, or any other amount required to be
paid under the Note, this Mortgage or any
other instrument securing the payment of the
Note, as the same shall become due and
payable, whether at maturity or when
accelerated pursuant to any power to
accelerate contained in the Note or
26
contained herein, and such failure continues
after a period of five (5) days from the day
written notice of such failure is given to
Grantor; provided, that the Noteholder shall
not be required to give such notice more than
two (2) times during any twelve (12) month
period; or
(b) the failure of Grantor timely and
properly to observe, keep or perform any
covenant, agreement, warranty or condition
herein required to be observed, kept or
performed, other than those referred to in
subparagraph 4.1 (a) or in any other
subparagraph hereof, and such failure
continues after a period of thirty (30) days
from the day written notice of such failure
is given to Grantor; provided, that i f
such failure because of its nature cannot
reasonably be cured within such thirty (30)
day period, and Grantor is diligently
pursuing such cure, Grantor shall have an
additional thirty (30) days to cure such
failure; or
(c) any representation contained herein
or in any other instrument securing the Note
or otherwise made by Grantor or any other
person or entity to the Noteholder in
connection with the loan evidenced by the
Note is false or misleading in any material
respect; or
(d) a default or event of default occurs
under any other instrument securing the
payment of the secured indebtedness or any
part thereof or under the Loan Agreement; or
(e) Grantor becomes insolvent, or makes
a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or
admits in writing its inability to pay its
debts as they become due; or
(f) a receiver, trustee or custodian is
appointed for, or takes possession of, all or
substantially all of the assets of Grantor or
any of the Property, either in a proceeding
brought by Grantor or in a proceeding brought
against Grantor and such appointment is not
discharged or such possession is not
terminated within thirty (30) days after the
effective date thereof or Grantor consents to
or
acquiesces in such appointment or possession;
or
(g) Grantor files a petition for relief
under the Federal Bankruptcy Code, or any
other present or future federal or state
insolvency, bankruptcy or similar law (all of
the foregoing including, without limitation,
the Federal Deposit Insurance Act,
hereinafter collectively called "applicable
Bankruptcy Law") or an involuntary petition
for relief is filed against Grantor under any
applicable Bankruptcy Law and such petition
is not dismissed within thirty (30) days
after the filing thereof, or an order for
relief naming Grantor is entered under any
applicable Bankruptcy Law, or any
composition, rearrangement, extension,
reorganization or other relief of debtors now
or hereafter existing is requested or
consented to by Grantor; or
27
(h) the Property or any part thereof is
taken on execution or other process of law in
any action against Grantor; or
(i) Grantor fails to have discharged
within a period of thirty (30) days any
attachment, sequestration or similar writ
levied upon any property of Grantor; or
(j) Grantor fails to pay within thirty
(30) days any final (after all appeals are
exhausted) money judgment against Grantor; or
(k) any of the events referred to in
subheadings (e), (f), (g), (i) or (j) shall
occur with respect to any joint venturer or
general partner of Grantor or any guarantor
of the payment of the secured indebtedness or
any part thereof and shall not be remedied
within the time set forth in said
subheadings; or
(l) Grantor abandons all or a portion of
the Property; or
(m) the holder of any lien or security
interest on the Property (without hereby
implying the consent of the Noteholder to the
existence or creation of any such lien or
security interest) institutes foreclosure or
other proceedings for the enforcement of its
remedies thereunder; or
(n) without the prior written consent of
the Noteholder, Grantor sells, leases (other
than leases entered into with Tenants of the
Property in the ordinary course of business),
exchanges, assigns, transfers, conveys or
otherwise disposes of all or any part of the
Property or any interest therein (except for
the disposition of worn-out or obsolete
personal property or fixtures under the
circumstances described in subparagraph
2.2(g) hereof), or legal or equitable title
to the Property, or any interest therein, is
vested in any other party, in any manner
whatsoever, by operation of law or otherwise,
or submits the Property to a condominium
regime pursuant to the Condominium Act of the
State of Texas, it being understood that the
consent of the Noteholder required hereunder
may be refused by the Noteholder in its sole
discretion or may be predicated upon any
terms, conditions and covenants deemed
advisable or necessary in the sole discretion
of the Noteholder, including but not limited
to the right to change the interest rate,
date of maturity or payments of principal
and/or interest on the Note, to require
payment of any amount as additional
consideration as a transfer fee or otherwise
and to require assumption of the Note and
this Mortgage; or
(o) without the prior written consent of
the Noteholder, Grantor creates, places or
permits to be created or placed, or through
any act or failure to act, acquiesces in the
placing of, or allows to remain, any deed of
trust, mortgage, voluntary or involuntary
lien, whether statutory, constitutional or
contractual (except for the lien for ad
valorem taxes on the Property which are not
delinquent), security interest, encumbrance
or charge, or conditional sale or other title
retention document, against or covering the
Property, or any part
28
thereof, other than the Permitted
Encumbrances, regardless of whether the same
are expressly or otherwise subordinate to the
lien or security interest created in this
Mortgage, subject, however, to Grantor's
right to contest same in good faith, pursuant
to the conditions for contesting liens in
Section 4.1 (r) of the Loan Agreement, or
acquires any fixtures, equipment or other
property forming a part of the Property
pursuant to a lease, license or similar
agreement in excess of $25,000 in the
aggregate; or
(p) the Property is so demolished,
destroyed or damaged that, in the reasonable
judgment of the Noteholder, it cannot be
restored or rebuilt with available funds to a
profitable condition within a reasonable
period of time; or
(q) so much of the Property is taken in
condemnation, or sold in lieu of
condemnation, or the Property is so
diminished in value due to any injury or
damages to the Property, that the remainder
thereof cannot, in the reasonable judgment of
the Noteholder, continue to be operated
profitably for the purpose for which it was
being used immediately prior to such taking,
sale or diminution; or
(r) Grantor dissolves, liquidates,
merges or consolidates or more than forty
percent (40%) of any ownership interest in
Grantor is sold, assigned, transferred,
mortgaged, pledged, encumbered, or otherwise
disposed of, voluntarily or involuntarily,
without the prior written consent of the
Noteholder or, if an individual, Grantor dies
or becomes legally incapacitated; or
(s) any failure of any representation or
warranty made under any Certification of Non-
Foreign Status furnished the Noteholder in
connection with the Note to be true and
correct in all respects or any failure to
perform or other breach of any covenant
therein; or
(t) any failure of any representation or
warranty made in any guaranty of the payment
of the secured indebtedness or any part
thereof to be true and correct in all
material respects or any failure to perform
or other breach of any covenant in said
guaranty.
4.2 ACCELERATION. Upon the occurrence of
a default, the Noteholder shall have the
option of declaring all secured indebtedness
in its entirety to be immediately due and
payable, and the liens and security interests
evidenced hereby shall be subject to
foreclosure in any manner provided for herein
or provided for by law as the Noteholder may
elect.
29
4.3 POSSESSION. Upon the occurrence of a
default, or any event or circumstance which,
with the lapse of time or the giving of
notice, or both, would constitute a default
hereunder, the Noteholder is authorized prior
or subsequent to the institution of any
foreclosure proceedings to enter upon the
Property, or any part thereof, and to take
possession of the Property and of all books,
records and accounts relating thereto and to
exercise without interference from Grantor
any and all rights which Grantor has with
respect to the management, possession,
operation, protection or preservation of the
Property, including the right to rent the
same for the account of Grantor and to deduct
from such rents all costs, expenses and
liabilities of every character incurred by
the Noteholder in collecting such rents and
in managing, operating, maintaining,
protecting or preserving the Property and to
apply the remainder of such rents on the
indebtedness secured hereby in such manner as
the Noteholder may elect. All such costs,
expenses and liabilities incurred by the
Noteholder in collecting such rents and in
managing, operating, maintaining, protecting
or preserving the Property, if not paid out
of rents as hereinabove provided, shall
constitute a demand obligation owing by
Grantor and shall bear interest from the date
of expenditure until paid at the rate of
interest payable on matured but unpaid
principal of or interest on the Note, all of
which shall constitute a portion of the
secured indebtedness. If necessary to obtain
the possession provided for above, the
Noteholder may invoke any and all legal
remedies to dispossess Grantor, including
specifically one or more actions for forcible
entry and detainer, trespass to try title and
restitution. IN CONNECTION WITH ANY ACTION
TAKEN BY THE NOTEHOLDER PURSUANT TO THIS
PARAGRAPH 4.3, THE NOTEHOLDER SHALL NOT BE
LIABLE FOR ANY LOSS SUSTAINED BY GRANTOR
RESULTING FROM ANY FAILURE TO LET THE
PROPERTY, OR ANY PART THEREOF, OR FROM ANY
OTHER ACT OR OMISSION OF THE NOTEHOLDER IN
MANAGING THE PROPERTY (REGARDLESS OF WHETHER
SUCH LOSS IS CAUSED BY THE NEGLIGENCE OF THE
NOTEHOLDER) UNLESS SUCH LOSS IS CAUSED BY THE
WILLFUL MISCONDUCT AND BAD FAITH OF THE
NOTEHOLDER, NOR SHALL THE NOTEHOLDER BE
OBLIGATED TO PERFORM OR DISCHARGE ANY
OBLIGATION, DUTY OR LIABILITY UNDER ANY LEASE
AGREEMENT COVERING THE PROPERTY OR ANY PART
THEREOF OR UNDER OR BY REASON OF THIS
INSTRUMENT OR THE EXERCISE OF RIGHTS OR
REMEDIES HEREUNDER. GRANTOR SHALL AND DOES
HEREBY AGREE TO INDEMNIFY THE NOTEHOLDER FOR,
AND TO HOLD THE NOTEHOLDER HARMLESS FROM, ANY
AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY
OR MIGHT BE INCURRED BY THE NOTEHOLDER UNDER
ANY SUCH LEASE AGREEMENT OR UNDER OR BY
REASON OF THIS MORTGAGE OR THE EXERCISE OF
RIGHTS OR REMEDIES HEREUNDER AND FROM ANY AND
ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY
BE ASSERTED AGAINST THE NOTEHOLDER BY REASON
OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON
ITS PART TO PERFORM OR DISCHARGE ANY OF
30
THE TERMS, COVENANTS OR AGREEMENTS CONTAINED
IN ANY SUCH LEASE AGREEMENT, REGARDLESS OF
WHETHER SUCH LIABILITY, LOSS, DAMAGE, CLAIMS
OR DEMANDS ARE THE RESULT OF THE NEGLIGENCE
OF THE NOTEHOLDER. Should the Noteholder
incur any such liability, the amount thereof,
including costs, expenses and reasonable
attorney's fees, shall be secured hereby and
Grantor shall reimburse the Noteholder
therefor immediately upon demand. Nothing in
this Paragraph 4.3 shall impose any duty,
obligation or responsibility upon the
Noteholder for the control, care, management
or repair of the Property, nor for the
carrying out of any of the terms and
conditions of any such lease agreement; nor
shall it operate to make the Noteholder
responsible or liable for any waste committed
on the Property by the Tenants or by any
other parties or for any dangerous or
defective condition of the Property, or for
any negligence in the management, upkeep,
repair or control of the Property resulting
in loss or injury or death to any Tenants,
licensee, employee or stranger. Grantor
hereby assents to, ratifies and confirms any
and all actions of the Noteholder with
respect to the Property taken under this
Paragraph 4.3. For purposes of this
paragraph, the term "Noteholder" shall
include the directors, officers, partners,
employees, attorneys and agents of the
Noteholder and any persons or entities owned
or controlled by, owning or controlling, or
under common control or affiliated with the
Noteholder.
4.4 FORECLOSURE. Upon the occurrence of
a default, the Trustee, his successor or
substitute, is authorized and empowered and
it shall be his special duty at the request
of the Noteholder to sell the Mortgaged
Property or any part thereof situated in the
State of Texas at the courthouse of any
county in the State of Texas in which any
part of the Mortgaged Property is situated,
at public venue to the highest bidder for
cash between the hours of 10 o'clock a.m. and
4 o'clock p.m. on the first Tuesday in any
month after having given notice of such sale
in accordance with the statutes of the State
of Texas then in force governing sales of
real estate under powers conferred by deed of
trust. Any sale made by the Trustee hereunder
may be as an entirety or in such parcels as
the Noteholder may request, and any sale may
be adjourned by announcement at the time and
place appointed for such sale without further
notice except as may be required by law. The
sale by the Trustee of less than the whole of
the Mortgaged Property shall not exhaust the
power of sale herein granted, and the Trustee
is specifically empowered to make successive
sale or sales under such power until the
whole of the Mortgaged Property shall be
sold; and, if the proceeds of such sale of
less than the whole of the Mortgaged Property
shall be less than the aggregate of the
indebtedness secured hereby and the expense
of executing this trust as provided herein,
this Mortgage and the lien hereof shall
remain in full force and effect as to the
unsold portion of the Mortgaged Property just
as though no sale had been made; provided,
however, that Grantor shall never have any
right to require the sale of less than the
whole of the Mortgaged Property but the
Noteholder shall have the right, at its sole
election, to request the Trustee to sell less
than the whole of the Mortgaged
31
Property. After each sale, the Trustee shall
make to the purchaser or purchasers at such
sale good and sufficient conveyances in the
name of Grantor, conveying the Property so
sold to the purchaser or purchasers in fee
simple with general warranty of title, and
shall receive the proceeds of said sale or
sales and apply the same as herein provided.
Payment of the purchase price to the Trustee
shall satisfy the obligation of purchaser at
such sale therefor, and such purchaser shall
not be responsible for the application
thereof. The power of sale granted herein
shall not be exhausted by any sale held
hereunder by the Trustee or his substitute or
successor, and such power of sale may be
exercised from time to time and as many times
as the Noteholder may deem necessary until
all of the Mortgaged Property has been duly
sold and all secured indebtedness has been
fully paid. In the event any sale hereunder
is not completed or is defective in the
opinion of the Noteholder, such sale shall
not exhaust the power of sale hereunder and
the Noteholder shall have the right to cause
a subsequent sale or sales to be made
hereunder. Any and all statements of fact or
other recitals made in any deed or deeds
given by the Trustee or any successor or
substitute appointed hereunder as to
nonpayment of the indebtedness secured
hereby, or as to the occurrence of any
default, or as to the Noteholder having
declared all of such indebtedness to be due
and payable, or as to the request to sell, or
as to notice of time, place and terms of sale
and of the properties to be sold having been
duly given, or as to the refusal, failure or
inability to act of the Trustee or any
substitute or successor, or as to the
appointment of any substitute or successor
trustee, or as to any other act or thing
having been duly done by the Noteholder or by
such Trustee, substitute or successor, shall
be taken as prima facie evidence of the truth
of the facts so stated and recited. The
Trustee, his successor or substitute, may
appoint or delegate any one or more persons
as agent to perform any act or acts necessary
or incident to any sale held by the Trustee,
including the posting of notices and the
conduct of sale, but in the name and on
behalf of the Trustee, his successor or
substitute.
4.5 JUDICIAL FORECLOSURE. This
instrument shall be effective as a mortgage
as well as a deed of trust and upon the
occurrence of a default may be foreclosed as
to any of the Property in any manner
permitted by the laws of the State of Texas
or of any other state in which any part of
the Property is situated, and any foreclosure
suit may be brought by the Trustee or by the
Noteholder. In the event a foreclosure
hereunder shall be commenced by the Trustee,
or his substitute or successor, the
Noteholder may at any time before the sale of
the Property direct the said Trustee to
abandon the sale, and may then institute suit
for the collection of the Note and the. other
secured indebtedness, and for the foreclosure
of this Mortgage. It is agreed that if the
Noteholder should institute a suit for the
collection of the Note or any other secured
indebtedness and for the foreclosure of this
Mortgage, the Noteholder may at any time
before the entry of a final judgment in said
suit dismiss the same, and require the
Trustee, his substitute or successor to sell
the Property in accordance with the
provisions of this Mortgage.
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4.6 RECEIVER. In addition to all other
remedies herein provided for, Grantor agrees
that upon the occurrence of a default, the
Noteholder shall as a matter of right be
entitled to the appointment of a receiver or
receivers for all or any part of the
Property, whether such receivership be
incident to a proposed sale of such property
or otherwise, and without regard to the value
of the Property or the solvency of any person
or persons liable for the payment of the
indebtedness secured hereby, and Grantor does
hereby consent to the appointment of such
receiver or receivers, waives any and all
defenses to such appointment and agrees not
to oppose any application therefor by the
Noteholder, but nothing herein is to be
construed to deprive the Noteholder of any
other right, remedy or privilege it may now
have under the law to have a receiver
appointed; provided, however, that the
appointment of such receiver, trustee or
other appointee by virtue of any court order,
statute or regulation shall not impair or in
any manner prejudice the rights of the
Noteholder to receive payment of the rents
and income pursuant to Paragraph 3.1 hereof.
Any money advanced by the Noteholder in
connection with any such receivership shall
be a demand obligation owing by Grantor to
the Noteholder and shall bear interest from
the date of making such advancement by the
Noteholder until
paid at the rate of interest payable on
matured but unpaid principal of or interest
on the Note and shall be a part of the
secured indebtedness and shall be secured by
this Mortgage and by any other instrument
securing the secured indebtedness.
4.7 PROCEEDS OF SALE. The proceeds of
any sale held by the Trustee or any receiver
or public officer in foreclosure of the liens
evidenced hereby shall be applied:
FIRST, to the payment of all necessary
costs and expenses incident to such
foreclosure sale, including but not limited
to all court costs and charges of every
character in the event foreclosed by suit,
and a reasonable fee to the Trustee acting
under the provisions of paragraph 4.4 if
foreclosed by power of sale as provided in
said paragraph, not exceeding five percent
(5%) of the proceeds of such sale;
SECOND, to the payment in full of the
secured indebtedness (including specifically
without limitation the principal, interest
and attorney's fees due and unpaid on the
Note and the amounts due and unpaid and owed
to the Noteholder under this Mortgage) in
such order as the Noteholder may elect; and
THIRD, the remainder, if any there shall
be, shall be paid to Grantor or to such other
party or parties as may be entitled thereto
by law.
33
4.8 THE NOTEHOLDER AS PURCHASER. The
Noteholder shall have the right to become the
purchaser at any sale held by any Trustee or
substitute or successor or by any receiver or
public officer, and any Noteholder purchasing
at any such sale shall have the right to
credit upon the amount of the bid made
therefor, to the extent necessary to satisfy
such bid, the secured indebtedness owing to
such Noteholder, or if such Noteholder holds
less than all of such indebtedness the pro
rata part thereof owing to such Noteholder,
accounting to all other Noteholders not
joining in such bid in cash for the portion
of such bid or bids apportionable to such
nonbidding Noteholder or Noteholders.
4.9 UNIFORM COMMERCIAL CODE. Upon the
occurrence of a default, the Noteholder may
exercise its rights of enforcement with
respect to the Collateral under the Texas
Business and Commerce Code, as amended, and
in conjunction with, in addition to or in
substitution for those rights and remedies:
(a) the Noteholder may enter upon the
Property to take possession of, assemble and
collect the Collateral or to render it
unusable; and
(b) the Noteholder may require Grantor
to assemble the Collateral and make it
available at a place the Noteholder
designates which is mutually convenient to
allow the Noteholder to take possession or
dispose of the Collateral;
and
(c) written notice mailed to Grantor as
provided herein five (5) days prior to the
date of public sale of the Collateral or
prior to the date after which private sale of
the Collateral will be made shall constitute
reasonable notice; and
(d) any sale made pursuant to the
provisions of this paragraph shall be deemed
to have been a public sale conducted in a
commercially reasonable manner if held
contemporaneously with the sale of the
Mortgaged Properly under power of sale as
provided herein upon giving the same notice
with respect to the sale of the Collateral
hereunder as is required for such sale of the
Mortgaged Property under power of sale; and
(e) in the event of a foreclosure sale,
whether made by the Trustee under the terms
hereof, or under judgment of a court, the
Collateral and the Mortgaged Property may, at
the option of the Noteholder, be sold as a
whole; and
(f) it shall not be necessary that the
Noteholder take possession of the Collateral
or any part thereof prior to the time that
any sale pursuant to the provisions of this
paragraph is conducted and it shall not be
necessary that the Collateral or any part
thereof be present at the location of such
sale; and
34
(g) prior to application of proceeds of
disposition of the Collateral to the secured
indebtedness, such proceeds shall be applied
to the reasonable expenses of retaking,
holding, preparing for sale or lease,
selling, leasing and the like and the
reasonable attorney's fees and legal expenses
incurred by the Noteholder; and
(h) any and all statements of fact or
other recitals made in any xxxx of sale or
assignment or other instrument evidencing any
foreclosure sale hereunder as to nonpayment
of the indebtedness or as to the occurrence
of any default, or as to the Noteholder
having declared all of such indebtedness to
be due and payable, or as to notice of time,
place and terms of sale and of the properties
to be sold having been duly given, or as to
any other act or thing having been duly done
by the Noteholder, shall be taken as prima
facie evidence of the truth of the facts so
stated and recited; and
(i) the Noteholder may appoint or
delegate any one or more persons as agent to
perform any act or acts necessary or incident
to any sale held by the Noteholder, including
the sending of notices and the conduct of the
sale, but in the name and on behalf of the
Noteholder.
4.10 PARTIAL FORECLOSURE. In the event
of a default in the payment of any part of
the secured indebtedness, the Noteholder
shall have the right to proceed with
foreclosure of the liens and security
interests evidenced hereby without declaring
the entire secured
indebtedness due, and in such event any such
foreclosure sale may be made subject to the
unmatured part of the secured indebtedness;
and any such sale shall not in any manner
affect the unmatured part of the secured
indebtedness, but as to such unmatured part
this Mortgage shall remain in full force and
effect just as though no sale had been made.
The proceeds of any such sale shall be
applied as provided in Paragraph 4.7 except
that the amount paid under subparagraph
SECOND thereof shall be only the matured
portion of the secured indebtedness and any
proceeds of such sale in excess of those
provided for in subparagraphs FIRST and
SECOND (modified as provided above) shall be
applied to installments of principal of and
interest on the Note in the inverse order of
maturity. Several sales may be made hereunder
without exhausting the right of sale for any
unmatured part of the secured indebtedness.
4.11 REMEDIES CUMULATIVE. All remedies
herein expressly provided for are cumulative
of any and all other remedies existing at law
or in equity and are cumulative of any and
all other remedies provided for in any other
instrument securing the payment of the
secured indebtedness, or any part thereof, or
otherwise benefiting the Noteholder, and the
Trustee and the Noteholder shall, in addition
to the remedies herein provided, be entitled
to avail themselves of all such other
remedies as may now or hereafter exist at law
or in equity for the collection of the
secured indebtedness and the enforcement of
the covenants here in and the foreclosure of
the liens and security interests
35
evidenced hereby, and the resort to any
remedy provided for hereunder or under any
such other instrument or provided for by law
shall not prevent the concurrent or
subsequent employment of any other
appropriate remedy or remedies.
4.12 RESORT TO ANY SECURITY. The
Noteholder may resort to any security given
by this Mortgage or to any other security now
existing or hereafter given to secure the
payment of the secured indebtedness, in whole
or in part, and in such portions and in such
order as may seem best to the Noteholder in
its sole and uncontrolled discretion, and any
such action shall not in anywise be
considered as a waiver of any of the rights,
benefits, liens or security interests
evidenced by this Mortgage.
4.13 WAIVER. To the full extent Grantor
may do so, Grantor agrees that Grantor will
not at any time insist upon, plead, claim or
take the benefit or advantage of any law now
or hereafter in force pertaining to the
rights and remedies of sureties or providing
for any appraisement, valuation, stay of
execution, or redemption, and Grantor, for
Grantor and Grantor's heirs, devisees,
representatives, successors and assigns, and
for any and all persons ever claiming any
interest in the Property, to the extent
permitted by law, hereby waives and releases
all rights of redemption, valuation,
appraisement, stay of execution, notice of
intention to mature or declare due the whole
of the secured indebtedness, notice of
election to mature or declare due the whole
of the secured indebtedness and all rights to
a marshaling of the assets of Grantor,
including the Property, or to a sale in
inverse order of alienation in the event of
foreclosure of the liens and security
interests hereby created. Grantor shall not
have or assert any right under any statute or
rule of law pertaining to the marshaling of
assets, sale in inverse order of alienation,
the exemption of homestead, the
administration of estates of decedents or
other matters whatever to defeat, reduce or
affect the right of the Noteholder under the
terms of this Mortgage to a sale of the
Property for the collection of the secured
indebtedness without any prior or different
resort for collection, or the right of the
Noteholder under the terms of this Mortgage
to the payment of such indebtedness out of
the proceeds of sale of the Property in
preference to every other claimant whatever.
If any law referred to in this paragraph and
now in force, of which Grantor or Grantor's
heirs, devisees, representatives, successors
and assigns and such other persons claiming
any interest in the Property might take
advantage despite this paragraph, shall
hereafter be repealed or cease to be in
force, such law shall not thereafter be
deemed to preclude the application of this
paragraph.
4.14 DELIVER5I OF POSSESSION AFTER
FORECLOSURE. In the event there is a
foreclosure sale hereunder and at the time of
such sale Grantor or Grantor's heirs,
devisees, representatives, successors or
assigns or any other persons claiming any
interest in the Property by, through or under
Grantor are occupying or using the Property,
or any part thereof, each and all shall
immediately become the tenant of the
purchaser at such sale, which tenancy
36
shall be a tenancy from day-to-day,
terminable at the will of either landlord or
tenant, at a reasonable rental per day based
upon the value of the property occupied, such
rental to be due daily to the purchaser. In
the event the tenant fails to surrender
possession of said property upon demand, the
purchaser shall be entitled to institute and
maintain an action for forcible entry and
detainer of said property.
4.15 TENDER AFTER ACCELERATION. If,
following the occurrence of a default and the
acceleration of the secured indebtedness but
prior to the foreclosure of this Mortgage
against the Property; Grantor shall tender to
the Noteholder payment of an amount
sufficient to pay the entire secured
indebtedness, such tender shall be deemed to
be a voluntary prepayment under the Note and,
consequently, Grantor shall also pay to the
Noteholder any charge or premium required
under the Note to be paid in order to prepay
principal and, if such principal payment is
made during any period when prepayment is
prohibited by this Mortgage or the Note, the
applicable charge or premium shall be the
maximum prepayment penalty provided for in
the Note; provided, however, that in no event
shall any amount payable under this
paragraph, when added to the interest
otherwise payable on the Note and the other
secured indebtedness, exceed the maximum
interest permitted under applicable law.
ARTICLE 5
MISCELLANEOUS
5.1 DEFEASANCE. If all of the secured
indebtedness be paid as the same becomes due
and payable and if all of the covenants,
warranties, undertakings and agreements made
in this Mortgage are kept and performed, then
and in that event only, all rights under this
Mortgage, except for Grantor's
indemnification obligations set forth herein,
shall terminate and the Property shall become
wholly clear of the liens, security
interests, conveyances and assignments
evidenced hereby, which shall be released by
the Noteholder in due form at Grantor's cost.
5.2 SUCCESSOR TRUSTEE. The Trustee may
resign by an instrument in writing addressed
to the Noteholder, or the Trustee may be
removed at any time with or without cause by
an instrument in writing executed by the
Noteholder. In case of the death,
resignation, removal or disqualification of
the Trustee or if for any reason the
Noteholder 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 the
Noteholder 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 the
Noteholder and the authority hereby conferred
shall extend to the appointment of other
successor and substitute trustees
successively
37
until the indebtedness secured hereby has
been paid in full or until the Property is
sold hereunder. In the event the indebtedness
secured hereby is owned by more than one
person or entity, the holder or holders of
not less than a majority in the amount of
such indebtedness shall have the right and
authority to make the appointment of a
successor or substitute trustee provided for
in the preceding sentence. Such appointment
and designation by the Noteholder or by the
holder or holders of not less than a majority
of the indebtedness secured hereby shall be
full evidence of the right and authority to
make the same and of all facts therein
recited. If the Noteholder 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
the 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 the Trustee; but nevertheless,
upon the written request of the Noteholder 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 the 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
the 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.
5.3 LIABILITY AND INDEMNIFICATION OF
TRUSTEE. THE TRUSTEE SHALL NOT BE LIABLE FOR
ANY ERROR OF JUDGMENT OR ACT DONE BY THE
TRUSTEE IN GOOD FAITH, OR BE OTHERWISE
RESPONSIBLE OR ACCOUNTABLE UNDER ANY
CIRCUMSTANCES WHATSOEVER (INCLUDING THE
TRUSTEE'S NEGLIGENCE1 EXCEPT FOR THE
TRUSTEE'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. The Trustee shall have the right
to rely on any instrument, document or
signature authorizing or supporting any
action taken or proposed to be taken by him
hereunder, believed by him in good faith to
be genuine. All moneys received by the
Trustee shall, until used or applied as
herein provided, be held in trust for the
purposes for which they were received, but
need not be segregated in any manner from any
other moneys (except to the extent required
by law), and the Trustee shall be under no
liability for interest on any moneys received
by him hereunder. GRANTOR WILL REIMBURSE THE
TRUSTEE FOR AND INDEMNIFY AND SAVE HIM
HARMLESS AGAINST, ANY
38
AND ALL LIABILITY AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES) WHICH MAY BE
INCURRED BY HIM IN THE PERFORMANCE OF HIS
DUTIES HEREUNDER (INCLUDlNG
ANY LIABILITY AND EXPENSES RESULTING FROM THE
TRUSTEE'S OWN NEGLIGENCE). THE FOREGOING
INDEMNITY SHALL NOT TERMINATE UPON RELEASE,
FORECLOSURE OR OTHER TERMINATION OF THIS
MORTGAGE.
5.4 WAIVER BY THE NOTEHOLDER. The
Noteholder may at any time and from time to
time in writing (a) waive compliance by
Grantor with any covenant herein made by
Grantor to the extent and in the manner
specified in such writing; (b) consent to
Grantor doing any act which hereunder Grantor
is prohibited from doing, or consent to
Grantor failing to do any act which hereunder
Grantor is required to do, to the extent and
in the manner specified in such writing; (c)
release any part of the Property, or any
interest therein, from the lien and security
interest of this Mortgage without the joinder
of the Trustee; or (d) release any party
liable, either directly or indirectly, for
the secured indebtedness or for any covenant
herein or in any other instrument now or
hereafter securing the payment of the secured
indebtedness, without impairing or releasing
the liability of any other party. No such act
shall in any way impair the rights of the
Noteholder hereunder except to the extent
specifically agreed to by the Noteholder in
such writing.
5.5 ACTIONS BY THE NOTEHOLDER. The lien,
security interest and other security rights
of the Noteholder hereunder shall not be
impaired by any indulgence, moratorium or
release granted by the Noteholder, including
but not limited to (a) any renewal,
extension, increase or modification which the
Noteholder may grant with respect to any
secured indebtedness, (b) any surrender,
compromise, release, renewal, extension,
exchange or substitution which the Noteholder
may grant in respect of the Property, or any
part thereof or any interest therein, or (c)
any release or indulgence granted to any
endorser, guarantor or surety of any secured
indebtedness. The taking of additional
security by the Noteholder shall not release
or impair the lien, security interest or
other security rights of the Noteholder
hereunder or affect the liability of Grantor
or of any endorser or guarantor or other
surety or improve the right of any permitted
junior lienholder in the Property.
5.6 RIGHTS OF THE NOTEHOLDER. The
Noteholder may waive any default without
waiving any other prior or subsequent
default. The Noteholder may remedy any
default without waiving the default remedied.
Neither the failure by the Noteholder to
exercise, nor the delay by the Noteholder in
exercising, any right, power or remedy upon
any default shall be construed as a waiver of
such default or as a waiver of the right to
exercise any such right, power or remedy at a
later date. No single or partial exercise by
the Noteholder of any right, power or remedy
hereunder shall exhaust the same or shall
preclude any other or further exercise
thereof, and every such right, power
39
or remedy hereunder may be exercised at any
time and from time to time. No modification
or waiver of any provision hereof nor consent
to any departure by Grantor therefrom shall
in any event be effective unless the same
shall be in writing and signed by the
Noteholder and then such waiver or consent
shall be effective only in the specific
instances, for the purpose for which given
and to the extent therein specified. No
notice to nor demand on Grantor in any case
shall of itself entitle Grantor to any other
or further notice or demand in similar or
other circumstances. Acceptance by the
Noteholder of any payment in an amount less
than the amount then due on any secured
indebtedness shall be
deemed an acceptance on account only and
shall not in any way affect the existence of
a default hereunder.
5.7 NOTIFICATION OF ACCOUNT DEBTORS. The
Noteholder may at any time after default by
Grantor notify the account debtors or
obligors of any accounts, chattel paper,
negotiable instruments or other evidences of
indebtedness included in the Collateral to
pay the Noteholder directly.
5.8 REPRODUCTION AS FINANCING STATEMENT.
A carbon, photographic or other reproduction
of this Mortgage or of any financing
statement relating to this Mortgage shall be
sufficient as a financing statement.
5.9 FIXTURE FILING. This Mortgage shall
be effective as a financing statement file as
a fixture filing with respect to all fixtures
included within the Property and is to be
filed for record in the real estate records
in the Office of the County Clerk where the
Property (including said fixtures) is
situated. This Mortgage shall also be
effective as a financing statement covering
minerals or the like (including oil and gas)
and accounts subject to Subsection (e) of
Section 9.103 of the Texas Business and
Commerce Code, as amended, and is to be filed
for record in the real estate records of the
county where the Property is situated. The
mailing address of Grantor is set forth below
opposite the signature of Grantor to this
Mortgage and the address of the Noteholder
from which information concerning the
security interest may be obtained is the
address of the Noteholder set forth at the
end of this Mortgage.
5.10 FILING AND RECORDATION. Grantor
will cause this Mortgage and all amendments
and supplements thereto and substitutions
therefor and all financing statements and
continuation statements relating hereto to be
recorded, filed, rerecorded and refiled in
such manner and in such places as the Trustee
or the Noteholder shall reasonably request,
and will pay all such recording, fling,
rerecording and refiling taxes, fees and
other charges.
5.11 DEALING WITH SUCCESSOR. In the
event the ownership of the Property or any
part thereof becomes vested in a person other
than Grantor, the Noteholder may, without
notice to Grantor, deal with such successor
or successors in interest with reference to
this Mortgage and to the indebtedness secured
hereby in the same manner as with Grantor,
without in any way
40
vitiating or discharging Grantor's liability
hereunder or for the payment of the
indebtedness secured hereby. No sale of the
Property, no forbearance on the part of the
Noteholder and no extension of the time for
the payment of the indebtedness secured
hereby given by the Noteholder shall operate
to release, discharge, modify, change or
affect, in whole or in part, the liability of
Grantor hereunder or for the payment of the
indebtedness secured hereby or the liability
of any other person hereunder or for the
payment of the indebtedness secured hereby,
except as agreed to in writing by the
Noteholder.
5.12 PLACE OF PAYMENT. The Note and all
other secured indebtedness which may be owing
hereunder at any time by Grantor shall be
payable at the place designated in the Note,
or if no such designation is made, at the
office of the Noteholder at the address
indicated in this Mortgage, or at such other
place as the Noteholder may designate in
writing.
5.13 SUBROGATION. To the extent that
proceeds of the Note are used to pay
indebtedness secured by any outstanding lien,
security interest, charge or prior
encumbrance against the Property, such
proceeds have been advanced by the Noteholder
at Grantor's request and the Noteholder shall
be subrogated to any and all rights, security
interests and liens owned or held by any
owner or holder of such outstanding liens,
security interests, charges or encumbrances,
irrespective of whether said liens, security
interests, charges or encumbrances are
released; provided, however, that the terms
and provisions of this Mortgage shall govern
the rights and remedies of the Noteholder and
shall supersede the terms, provisions, rights
and remedies under and pursuant to the
instruments creating the lien or liens to
which the Noteholder is subrogated hereunder.
5.14 APPLICATION OF INDEBTEDNESS. If any
part of the secured indebtedness cannot be
lawfully secured by this Mortgage or if any
part of the Property cannot be lawfully
subject to the lien and security interest
hereof to the full extent of such
indebtedness, then all payments made shall be
applied on said indebtedness first in
discharge of that portion thereof which is
unsecured by this Mortgage.
5.15 USURY. It is the intent of the
Noteholder and Grantor in the execution of
the Note, this Mortgage and all other
instruments now or hereafter securing the
Note or executed in connection therewith or
under any other written or oral agreement by
Grantor in favor of the Noteholder to
contract in strict compliance with applicable
usury law. In furtherance thereof, the
Noteholder and Grantor stipulate and agree
that none of the terms and provisions
contained in the Note, this Mortgage or any
other instrument securing the Note or
executed in connection herewith, or in any
other written or oral agreement by Grantor in
favor of the Noteholder, shall ever be
construed to create a contract to pay for the
use, forbearance or detention of money,
interest at a rate in excess of the maximum
interest rate permitted to be charged by
41
applicable law. Neither Grantor nor any
guarantors, endorsers or other parties now or
hereafter becoming liable for payment of the
Note or the other indebtedness secured hereby
shall ever be required to pay interest on the
Note or on indebtedness arising under any
instrument securing the Note or executed in
connection therewith, or in any other written
or oral agreement by Grantor in favor of the
Noteholder, at a rate in excess of the
maximum interest that may be lawfully charged
under applicable law, and the provisions of
this paragraph shall control over all other
provisions of the Note, this Mortgage and any
other instruments now or hereafter securing
the Note or executed in connection herewith
or any other oral or written agreements which
may be in apparent conflict herewith. The
Noteholder expressly disavows any intention
to charge or collect excessive unearned
interest or finance charges in the event the
maturity of the Note is accelerated. If the
maturity of the Note shall be accelerated for
any reason or if the principal of the Note is
paid prior to the end of the term of the
Note, and as a result thereof the interest
received for the actual period of existence
of the loan evidenced by the Note exceeds the
amount of interest that would have accrued at
the applicable maximum lawful rate, the
Noteholder shall, at its option, either
refund to Grantor the amount of such excess
or credit the amount of such excess against
the principal balance of the Note then
outstanding and thereby shall render
inapplicable any and all penalties of any
kind provided by applicable law as a result
of the excess interest. In the event that the
Noteholder shall collect monies and/or any
other thing of value which are deemed to
constitute interest which would increase the
effective interest rate on the Note or the
other indebtedness secured hereby to a rate
in excess of that permitted to be charged by
applicable law, an amount equal to interest
in excess of the lawful rate shall, upon such
determination, at the option of the
Noteholder, be either immediately returned to
Grantor or credited against the principal
balance of the Note then outstanding or the
other indebtedness secured hereby, in which
event any and all penalties of any kind under
applicable law as a result of such excess
interest shall be inapplicable. By execution
of this Mortgage, Grantor acknowledges that
it believes the loan evidenced by the Note to
be non-usurious and agrees that if, at any
time, Grantor should have reason to believe
that such loan is in fact usurious, it will
give the Noteholder notice of such condition
and Grantor agrees that the Noteholder shall
have ninety (90) days after receipt of such
notice in which to make appropriate refund or
other adjustment in order to correct such
condition it in fact such exists. The term
"applicable law" as used in this paragraph
shall mean the laws of the State of Texas or
the laws of the United States, whichever laws
allow the greater rate of interest, as such
laws now exist or may be changed or amended
or come into effect in the future.
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5.16 NOTICE. Any notice, request, demand
or other communication required or permitted
hereunder, or under the Note, or under any
other instrument securing the payment of the
Note (unless otherwise expressly provided
therein) shall be given in writing by (a)
personal delivery, or (b) expedited delivery
service with proof of delivery, or (c) United
States Mail, postage prepaid, registered or
certified mail, return receipt requested, or
(d) prepaid telegram, telex or telecopy sent
to the intended addressee at the address
shown on the signature page of this Mortgage,
or to such different address as the addressee
shall have designated by written notice sent
in accordance herewith, and shall be deemed
to have been given and received either at the
time of personal delivery or, in the case of
delivery service or mail, as of the date of
first attempted delivery at the address and
in the manner provided herein, or in the case
of telegram, telex or telecopy, upon receipt;
provided that, service of a notice required
by Tex. Property Code Section 51.002 shall be
considered complete when the requirements of
that statute are met.
5.17 HEIRS. SUCCESSORS AND ASSIGNS. The
terms, provisions, covenants and conditions
hereof shall be binding upon Grantor, and the
heirs, devisees, representatives, successors
and assigns of Grantor including all
successors in interest of Grantor in and to
all or any part of the Property, and shall
inure to the benefit of the Trustee and the
Noteholder and their respective heirs,
successors, substitutes and assigns and shall
constitute covenants running with the land.
All references in this Mortgage to Grantor,
Trustee or the Noteholder shall be deemed to
include all such heirs, devisees,
representatives, successors, substitutes and
assigns.
5.18 SEVERABILITY. A determination that
any provision of this Mortgage is
unenforceable or invalid shall not affect the
enforceability or validity of any other
provision and any determination that the
application of any provision of this Mortgage
to any person or circumstance is illegal or
unenforceable shall not affect the
enforceability or validity of such provision
as it may apply to any other persons or
circumstances.
5.19 GENDER AND NUMBER. Within this
Mortgage, words of any gender shall be held
and construed to include any other gender,
and words in the singular number shall be
held and construed to include the plural, and
words in the plural number shall be held and
construed to include the singular, unless in
each instance the context otherwise requires.
5.20 COUNTERPARTS. This Mortgage may be
executed in any number of counterparts with
the same effect as if all parties hereto had
signed the same document. All such
counterparts shall be construed together and
shall constitute one instrument, but in
making proof hereof it shall only be
necessary to produce one such counterpart.
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5.21 JOINT AND SEVERAL. Where two or
more persons or entities have executed this
Mortgage, unless the context clearly
indicates otherwise, the term "Grantor" as
used in this Mortgage means the grantors
hereunder or either or any of them and the
obligations of Grantor hereunder shall be
joint and several.
5.22 REPORTING REQUIREMENTS. Grantor
agrees to comply with any and all reporting
requirements applicable to the transaction
evidenced by the Note and secured by this
Mortgage which are set forth in any law,
statute, ordinance, rule, regulation, order
or determination of any governmental
authority, including but not limited to The
International Investment Survey Act of 1976,
The Agricultural Foreign Investment
Disclosure Act of 1978, The Foreign
Investment in Real Property Tax Act of 1980
and the Tax Reform Act of 1984 and further
agrees upon request of the Noteholder to
furnish the Noteholder with evidence of such
compliance.
5.23 HEADINGS. The paragraph headings
contained in this Mortgage are for
convenience only and shall in no way enlarge
or limit the scope or meaning of the various
and several paragraphs hereof.
5.24 CONSTRUCTION MORTGAGE. This
Mortgage is a construction mortgage (as that
term is defined in Section 9.313(a) (3) of
the Texas Business and Commerce Code) in that
it secures an obligation incurred for the
construction of an improvement on land
including the acquisition cost of the land.
It is understood and agreed that funds to be
advanced upon the Note are to be used in the
construction of certain improvements on the
land herein described in accordance with the
Loan Agreement.
5.25 CONSENT OF THE NOTEHOLDER. Except
where otherwise provided herein, in any
instance hereunder where the approval,
consent or the exercise of judgment of the
Noteholder is required, the granting or
denial of such approval or consent and the
exercise of such judgment shall be within the
sole discretion of the Noteholder, and the
Noteholder shall not, for any reason or to
any extent, be required to grant such
approval or consent or exercise such judgment
in any particular manner, regardless of the
reasonableness of either the request or the
Noteholder's judgment.
5.26 MODIFICATION OR TERMINATION. The
Loan Documents may only be modified or
terminated by a written instrument or
instruments executed by the party against
which enforcement of the modification or
termination is asserted. Any alleged
modification or termination which is not so
documented shall not be effective as to any
party.
44
5.27 NEGATION OF PARTNERSHIP. Nothing
contained in the Loan Documents is intended
to create any partnership, joint venture or
association between Grantor and the
Noteholder, or in any way make the Noteholder
a co-principal with Grantor with reference to
the Property, and any inferences to the
contrary are hereby expressly negated.
5.28 MODIFICATION BY SUBSEQUENT OWNERS.
Grantor agrees that it shall be bound by any
modification of this Mortgage or any of the
other Loan Documents made by the Noteholder
and any subsequent owner of the Property,
with or without notice to Grantor, and no
such modification shall impair the
obligations of Grantor under this Mortgage or
under any Loan Document. Nothing in this
paragraph shall be construed as permitting
any transfer of the Property which would
constitute a default under this Mortgage.
5.29 ENTIRE AGREEMENT. The Loan
Documents constitute the entire understanding
and agreement between Grantor and the
Noteholder with respect to the transactions
arising in connection with the indebtedness
secured hereby and supersede all prior
written or oral understandings and agreements
between Grantor and the Noteholder with
respect thereto. Grantor hereby acknowledges
that, except as incorporated in writing in
the Loan Documents, there are not, and were
not, and no persons are or were authorized by
the Noteholder to make, any representations,
understandings, stipulations, agreements or
promises, oral or written, with respect to
the transaction which is the subject of the
Loan Documents.
5.30 APPLICABLE LAW. THIS MORTGAGE AND
THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH. THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO TEXAS' PRINCIPLES OF
CONFLICTS OF LAW) AND THE LAW OF THE UNITED
STATES APPLICABLE TO TRANSACTIONS IN SUCH
STATE. GRANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY TEXAS
OR FEDERAL COURT SITTING IN DALLAS. TEXAS OR
ANY COUNTY IN TEXAS WHERE ANY PORTION OF THE
PROPERZY IS LOCATED OVER ANY SUIT. ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY
OF THE LOAN DOCUMENTS. AND GRANTOR HEREBY
AGREES AND CONSENTS THAT IN ADDITION TO ANY
METHODS OF SERVICE OF PROCESS PROVIDED FOR
UNDER APPLICABLE LAW ALL SERVICE OF PROCESS
IN ANY SUCH SUIT ACTION OR PROCEEDING IN ANY
TEXAS OR FEDERAL COURT SITTING IN DALLAS.
TEXAS (OR SUCH OTHER COUNTY IN TEXAS) MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL. RETURN
RECEIPT REQUESTED DIRECTED TO GRANTOR AT THE
ADDRESS OF GRANTOR FOR THE GIVING OF NOTICES
PURSUANT TO PARAGRAPH
45
5.16 HEREOF AND SERVICE SO MADE SHALL BE
COMPLETE FIVE 5 DAYS AFTER THE SAME SHALL
HAVE BEEN SO MAILED.
5.31 WAIVER OF JUDICIAL PROCEDURAL
MATTERS. Grantor hereby expressly and
unconditionally waives, in connection with
any suit, action or proceeding brought by the
Noteholder in connection with any of the Loan
Documents, any and every right it may have to
(i) injunctive relief, (ii) a trial by jury,
(iii) interpose any counterclaim therein, and
(iv) have the same consolidated with any
other or separate suit, action or proceeding.
Nothing herein contained shall prevent or
prohibit Grantor from instituting or
maintaining a separate action against the
Noteholder with respect to any asserted
claim.
IN WITNESS WHEREOF, Grantor has executed
this Deed of Trust, Mortgage and Security
Agreement as of the 26th day of
November,1996.
The address of Grantor is: ESC II,
L.P.,
a Washington limited
partnership
By: ESC X.X. XX, INC., a
Washington
0000 Xxxxxxx Xxxxxx corporation, general
partner
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000 By: /s/
Xxxxxxx X. Xxxxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Brandstom
Title: President
The address of the
Noteholder is:
000 Xxxxx Xxxxxx Xxxxx Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
00
XXX XXXXX XX Xxxxxxxxxx )
)
COUNTY OF King )
This instrument was acknowledged before
me on November 25, 1996, by Xxxxxxx X.
Xxxxxxxxxx, President of ESC X.X. XX, INC., a
Washington corporation, in its capacity as
general partner of ESC II, L.P., a Washington
limited partnership, on behalf of said
corporation and limited partnership.
/s/ Xxxxxxxxx X. Xxxxxxx
-------------------------------
Notary Public
State of WA
Print Name of Notary:
Xxxxxxxxx X. Xxxxxxx
---------------------------------
[SEAL]
My commission expires:
March 30, 1999
----------------------------
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