SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 20,
1996
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact name of registrant as specified in its charter)
Texas 1-9016 75-6335572
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
6220 North Beltline, Suite 205, Irving, 75063
Texas
(Address of principal executive (Zip Code)
offices)
972/550-6053
(Registrant's telephone number, including area code)
Item 5. Other Events
On November 19, 1996, American Industrial Properties REIT
(the "Trust") announced that AIP Properties #3, L.P., a newly-
formed Delaware limited partnership that is a wholly-owned
subsidiary of the Trust ("AIP Properties #3"), completed a
mortgage financing with an affiliate of AEGON USA Realty
Advisors, Inc. ("AEGON") in the amount of $27,990,000. The AEGON
financing consists of non-recourse loans that are secured by
first liens on 9 properties held by AIP Properties #3 and one
property located in San Antonio, Texas currently under contract
to be acquired by AIP Properties #2, L.P., a Delaware corporation
and wholly-owned subsidiary of the Trust ("AIP Properties #2"),
in connection with an exchange of properties, as more fully
discussed below (the "AEGON Properties"). Net proceeds available
from the AEGON financing (net of $1,537,500 which remains in
escrow on the San Antonio, Texas property under contract and
$350,000 which will be released upon the occurrence of certain
events in connection with one of the properties securing the
AEGON loans) were used to retire existing debt as discussed
below. The interest rate on the AEGON loans is fixed at 8.61%.
The loans mature on December 1, 2003, and monthly payments of
principal and interest are based on an amortization of 22 years,
with interest paid in arrears. Except as expressly provided, no
portion of the AEGON loans may be prepaid for 3 years. Payments
under such provisions shall include the principal amount owed
under the related note, plus a premium and reimbursement of
AEGON's costs and expenses incurred in connection with the
release.
In connection with the AEGON financing, the Trust formed AIP
Properties #3 and AIP Properties #3 GP, Inc., a Texas
corporation. The Trust beneficially owns 99% of the partnership
interests of AIP Properties #3 as its sole limited partner. The
Trust owns 100% of the outstanding shares of AIP Properties GP
#3, Inc., which serves as the general partner of AIP Properties
#3 and owns the remaining 1% general partner interest of the
limited partnership.
The Trust conveyed the following 8 properties to AIP
Properties #3: (1) Beltline Business Center, consisting of 3
industrial buildings located in Irving, Texas, a suburb of
Dallas, that are 100% finished for office space and, together,
comprise approximately 61,000 square feet of net rentable space,
which space also houses the Trust's roughly 2,500 square feet of
corporate office space; (2) Gateway 5 and 6, consisting of 2
industrial buildings located in Irving, Texas, comprising
approximately 79,000 square feet of net rentable space; (3)
Meridian Street Warehouse, an industrial distribution property in
Arlington, Texas, comprising approximately 72,000 square feet of
net rentable space; (4) Northgate II, consisting of 4 industrial
buildings located within a 21-building industrial park in Dallas,
Texas, consisting of approximately 236,000 square feet of net
rentable space; (5) Commerce Park, consisting of 2 industrial
buildings in Houston, Texas, comprising approximately 87,000
square feet of net rentable space; (6) Plaza Southwest,
consisting of 5 industrial buildings in Houston, Texas,
comprising approximately 149,000 square feet of net rentable
space; (7) Westchase Park, consisting of 2 industrial buildings
in Houston, Texas, comprising approximately 47,000 square feet of
net rentable space; and (8) Huntington Drive Center, consisting
of a two-story office building and an industrial building,
located in Monrovia, California, a suburb of Los Angeles,
comprising approximately 62,000 square feet of net rentable
space. Patapsco #1 Limited Partnership and Patapsco #2 Limited
Partnership, both Delaware limited partnerships and wholly-owned
subsidiaries of the Trust, conveyed their respective interests in
Patapsco Industrial Center to AIP Properties #3. Patapsco
Industrial Center is a five-building, two phase industrial park
located in Linthicum Heights, Maryland, a suburb of Baltimore,
and comprises approximately 95,000 square feet of net rentable
space.
AIP Properties #2 has entered into an Agreement of Purchase
and Sale dated October 25, 1996, which transaction is expected to
close, subject to the satisfactory completion of due diligence,
on or about December 20, 1996. The transaction involves the sale
by AIP Properties #2, of the Northview Distribution Center for
$4,799,000 (including the assumption of an existing loan from
AMRESCO Capital Corporation to AIP Properties #2 , in the
approximate principal amount of $2,194,000), in exchange for an
office/warehouse property comprising approximately 83,000 square
feet of net rentable space, located in San Antonio, Texas, for a
purchase price of $2,286,000. If the transaction is completed,
AIP Properties #2 will transfer the acquired property to the
Trust, which in turn will transfer the property to AIP Properties
#3. If and until the transaction is completed, $1,537,500 of the
proceeds of the AEGON loans will be held in escrow. In the event
the transaction is not concluded by December 25, 1996, the
$1,537,500 note becomes due and payable. AIP Properties #3 may
utilize the funds held in escrow to satisfy the note, but will
also be obligated to pay AEGON for interest accrued on the
$1,537,500.
On November 14, 1996, the Trust sold the Springbrook
Business Park, an industrial building located in Kent,
Washington, a suburb of Seattle, comprising approximately 81,000
square feet of net rentable space (the "Springbrook Property").
The Springbrook Property was sold pursuant an agreement between
the Trust and Seattle First National Bank, as Ancillary Trustee
for Copper Mountain Financial Group, Inc., as Custodian for
Locals 302 and 612 of the International Union of Operating
Engineers - Employers Construction Industry Retirement Fund for
$4,500,000.
On October 22, 1996, the Trust entered into a contract to
sell an industrial building located in Edina, Minnesota, a suburb
of Minneapolis, comprising approximately 60,000 square feet of
net rentable space (the "Cahill Property") for $2,400,000. This
sale is currently scheduled to close, subject to completion of
due diligence, on or about December 20, 1996. If the sale
occurs, net proceeds of approximately $2,300,000 will be utilized
to retire existing debt as discussed below.
THE INFORMATION CONTAINED IN THE FOLLOWING TABLES THAT ARE
NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE INCLUDED IN THE FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING:
CHANGES IN GENERAL ECONOMIC CONDITIONS IN THE MARKETS THAT COULD
IMPACT DEMAND FOR THE TRUST'S PROPERTIES AND CHANGES IN FINANCIAL
MARKETS AND INTEREST RATES IMPACTING THE TRUST'S ABILITY TO MEET
ITS FINANCING NEEDS AND OBLIGATIONS.
The Trust's total property portfolio (including the AEGON
Properties) includes over 230 tenants. The Trust's tenant base
is diverse with the average tenant occupying approximately 6,400
square feet and the Trust's largest tenant occupying 103,305
square feet. Average lease terms are between three to five
years. No tenant possesses any right to acquire buildings they
occupy, nor are tenants granted below market renewal options.
The following table provides additional rental income information
for the AEGON Properties.
<TABLE>
1996 1997 1998 1999 2000
<C> <C> <C> <C> <C> <C>
Meridian Street Warehouse
(A) 138,600 40,425 0 0 0
(B) 1 1 0 0 0
(C) 33,264 38,808 0 0 0
(D) 118,000 0 0 0 0
Beltline Business Center
(A) 360,778 292,479 170,367 46,648 0
(B) 7 7 10 6 0
(C) 12,548 12,478 19,616 12,754 0
(D) 261,000 0 0 0 0
Patapsco Industrial Center
(A) 590,983 441,467 289,934 182,884 106,746
(B) 2 8 1 4 7
(C) 3,791 27,154 1,950 16,953 29,230
(D) 399,000 0 0 0 0
Plaza Southwest 1-5
(A) 567,262 471,445 302,372 187,745 61,529
(B) 3 8 7 6 6
(C) 9,727 32,972 23,906 14,810 35,054
(D) 534,000 0 0 0 0
Commerce Park North
(A) 481,450 444,884 391,025 276,203 142,981
(B) 0 2 2 2 3
(C) 0 4,630 24,050 19,998 32,932
(D) 378,000 0 0 0 0
Gateway 5&6
(A) 369,153 163,703 82,310 5,777 0
(B) 0 1 4 1 0
(C) 0 10,819 20,082 9,904 0
(D) 388,000 0 0 0 0
Huntington Drive
(A) 951,847 978,316 577,945 219,096 219,096
(B) 0 3 2 0 2
(C) 0 4,986 26,298 0 24,344
(D) 679,000 0 0 0 0
Northgate II
(A) 764,762 764,984 694,604 486,580 111,362
(B) 0 0 4 7 1
(C) 0 0 38,067 153,480 18,600
(D) 705,000 0 0 0 0
Westchase Park
(A) 249,731 261,147 237,956 162,132 81,490
(B) 0 0 2 4 1
(C) 0 0 4,800 19,865 7,625
(D) 229,000 0 0 0 0
TOTAL
(A) 4,474,566 3,858,850 2,746,513 1,567,065 723,204
(B) 13 30 32 30 20
(C) 59,330 131,847 158,769 247,764 147,785
(D) 3,691,000 0 0 0 0
</TABLE>
<TABLE>
2001 2002 2003 2004 2005
<C> <C> <C> <C> <C> <C>
Plaza Southwest 1-5
(A) 12,497 0 0 0 0
(B) 4 0 0 0 0
(C) 18,361 0 0 0 0
(D) 0 0 0 0 0
Gateway 5&6
(A) 0 0 0 0 0
(B) 1 0 0 0 0
(C) 37,981 0 0 0 0
(D) 0 0 0 0 0
Huntington Drive
(A) 41,778 0 0 0 0
(B) 0 0 0 1 0
(C) 0 0 0 6,590 0
(D) 0 0 0 0 0
Northgate II
(A) 85,728 6,528 0 0 0
(B) 1 1 0 0 0
(C) 5,280 20,400 0 0 0
(D) 0 0 0 0 0
Westchase Park
(A) 9,825 0 0 0 0
(B) 3 0 0 0 0
(C) 15,340 0 0 0 0
(D) 0 0 0 0 0
TOTAL 2001 2002 2003 2004 2005
(A) 149,828 6,528 0 0 0
(B) 9 1 0 1 0
(C) 76,962 20,400 0 6,590 0
(D) 0 0 0 0 0
(A) Annual minimum rental payments for existing tenants
(B) Number of tenant leases expiring per year
(C) Square footage of tenant leases expiring per year
(D) FY 1997 projected net operating income
</TABLE>
The following table reflects comparable information for
the Trust's other properties.
<TABLE>
1996 1997 1998 1999 2000
<C> <C> <C> <C> <C> <C>
Burnsville
(A) 315,624 477,515 298,446 420,406 226,858
(B) 0 0 1 3 0
(C) 0 0 2,891 17,621 0
(D) 296,000 0 0 0 0
Cahill
(A) 296,959 226,289 174,539 102,361 49,803
(B) 0 1 0 1 0
(C) 0 18,012 0 17,716 0
(D) 298,000 0 0 0 0
Northview Distribution Center
(A) 492,879 454,294 313,908 148,992 145,427
(B) 0 0 2 1 1
(C) 0 0 95,018 28,371 1
(D) 436,000 0 0 0 0
Northwest Business Park
(A) 740,120 660,571 354,899 89,975 47,531
(B) 0 3 6 2 1
(C) 0 37,514 59,762 16,896 3,648
(D) 681,000 0 0 0 0
Tamarac Square
(A) 2,093,111 1,849,278 1,763,165 1,296,332 1,113,103
(B) 8 4 12 6 6
(C) 8,421 9,967 24,222 14,580 15,485
(D) 2,038,000 0 0 0 0
TOTAL
(A) 3,938,693 3,667,947 2,904,957 2,058,066 1,582,722
(B) 8 8 21 13 8
(C) 8,421 65,493 181,893 95,184 19,134
(D) 3,749,000 0 0 0 0
</TABLE>
<TABLE>
2001 2002 2003 2004 2005
<C> <C> <C> <C> <C> <C>
Burnsville
(A) 190,555 0 0 0 0
(B) 2 0 0 0 0
(C) 25,554 0 0 0 0
(D) 0 0 0 0 0
Cahill
(A) 16,601 0 0 0 0
(B) 1 0 0 0
(C) 9,862 0 0 0 0
(D) 0 0 0 0 0
Northview Distribution Center
(A) 17,036 0 0 0 0
(B) 2 0 0 0 0
(C) 29,054 0 0 0 0
(D) 0 0 0 0 0
Northwest Business Park
(A) 17,500 0 0 0 0
(B) 1 0 0 0 0
(C) 6,000 0 0 0 0
(D) 0 0 0 0 0
Tamarac Square
(A) 783,886 725,151 579,234 346,432 108,576
(B) 6 1 2 2 4
(C) 35,034 8,000 19,894 6,171 10,700
(D) 0 0 0 0 0
TOTAL
(A) 1,025,578 725,151 579,234 346,432 108,576
(B) 12 1 2 2 4
(C) 105,504 8,000 19,894 6,171 10,700
(D) 0 0 0 0 0
(A) Annual minimum rental payments for existing tenants
(B) Number of tenant leases expiring per year
(C) Square footage of tenant leases expiring per year
(D) FY 1997 projected net operating income
</TABLE>
Net proceeds from the sale of Springbrook Business Park
and from the AEGON loans were utilized by the Trust in
connection with the Trust's option to obtain a discount on
its indebtedness to The Manufacturers Life Insurance Company
("MLI") and The Manufacturers Life Insurance Company
(U.S.A.) ("MLI-USA"). As previously reported, pursuant to
an Agreement to settle litigation and repay the Trust's 8.8%
notes to MLI and MLI-USA (the "MLI Agreement") and related
documents, the Trust was granted the option to repay the
approximately $45,239,000 principal amount due and owing on
its outstanding notes for $36,800,000 (the "Option Price").
In order to achieve the discount on the principal balance of
the MLI notes, the Trust is required to pay at least
$25,000,000 to MLI and MLI-USA by November 23, 1996, to be
applied pro rata to the outstanding principal balance of the
notes and dollar-for-dollar to the Option Price. Net
proceeds from the sale of Springbrook Business Park and from
the AEGON loans in the amount of $28,754,000 were paid to
MLI, thus satisfying the minimum payment required by
November 23, 1996. As provided in the MLI Agreement, the
Trust has earned one-half of the potential discount and will
record an extraordinary gain of $4,220,000 in the fourth
quarter of 1996.
The Trust must pay the remaining amount of the Option Price
during extended option periods ending on March 31, 1997 or
June 30, 1997, subject to the payment of additional
principal payments in the amount of $250,000 and $150,000,
respectively (which will be applied pro rata to the
outstanding principal balance of the notes but not the
Option Price). Interest also continues to accrue at the non-
default rate of 8.8% per annum (and at the default rate upon
an event of default), and monthly interest payments
beginning June 3, 1996 must be made in order to receive the
discount. Although interest will accrue against the
outstanding principal balance of the MLI notes, the interest
payments will be calculated against the balance of the
Option Price; the portion of the accrued interest which is
not satisfied by the required monthly payments will be
deferred and due only upon an event of default and not
payable if the Trust performs its obligations pursuant to
the Agreement.
The MLI notes remain fully matured, due and payable,
subject to a moratorium on any collection efforts by MLI and
MLI-USA through November 23, 1996, with possible extensions
through June 30, 1997 as described above. As long as the
Trust remains current in its obligations under the
Agreement, it will be required to pay the outstanding
principal balance of the MLI notes plus the 8.8% interest
thereon, net of interest payments paid on the Option Price
described above. If the Trust successfully completes the
discounted payment of the MLI notes, this transaction will
result in a total gain to the Trust of approximately
$9,807,000, or $1.08 per share (comprised of approximately
$8,439,000 of reduced principal payments and approximately
$1,368,000 of accrued and unpaid interest).
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibits
99.1 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (Huntington Drive)
99.2 Note dated November 15, 1996 in the original
principal amount of $4,575,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Huntington Drive)
99.3 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (Patapsco Industrial Center)
99.4 Note dated November 15, 1996 in the original
principal amount of $3,112,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Patapsco Industrial Center)
99.5 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (Woodlake Dist. Center)
99.6 Note dated November 15, 1996 in the original
principal amount of $1,537,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Woodlake Dist. Center)
99.7 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (All Texas Properties except
Woodlake)
99.8 Note dated November 15, 1996 in the original
principal amount of $1,162,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Meridian)
99.9 Note dated November 15, 1996 in the original
principal amount of $2,775,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Beltline)
99.10 Note dated November 15, 1996 in the original
principal amount of $3,375,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Plaza Southwest)
99.11 Note dated November 15, 1996 in the original
principal amount of $2,100,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Commerce Park North)
99.12 Note dated November 15, 1996 in the original
principal amount of $2,850,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Gateway)
99.13 Note dated November 15, 1996 in the original
principal amount of $5,175,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Northgate)
99.14 Note dated November 15, 1996 in the original
principal amount of $1,327,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Westchase)
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ Charles W. Wolcott
Charles W. Wolcott
President and Chief Executive Officer
DATE: November 20, 1996
Index to Exhibits
Exhibit No. Description
*99.1 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (Huntington Drive)
*99.2 Note dated November 15, 1996 in the original
principal amount of $4,575,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Huntington Drive)
*99.3 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (Patapsco Industrial Center)
*99.4 Note dated November 15, 1996 in the original
principal amount of $3,112,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Patapsco Industrial Center)
*99.5 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (Woodlake Dist. Center)
*99.6 Note dated November 15, 1996 in the original
principal amount of $1,537,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Woodlake Dist. Center)
*99.7 Deed of Trust and Security Agreement dated November
15, 1996 between AIP Properties #3, L.P. and Life Investors
Insurance Company of America. (All Texas Properties except
Woodlake)
*99.8 Note dated November 15, 1996 in the original
principal amount of $1,162,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Meridian)
*99.9 Note dated November 15, 1996 in the original
principal amount of $2,775,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Beltline)
*99.10 Note dated November 15, 1996 in the original
principal amount of $3,375,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Plaza Southwest)
*99.11 Note dated November 15, 1996 in the original
principal amount of $2,100,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Commerce Park North)
*99.12 Note dated November 15, 1996 in the original
principal amount of $2,850,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Gateway)
*99.13 Note dated November 15, 1996 in the original
principal amount of $5,175,000 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Northgate)
*99.14 Note dated November 15, 1996 in the original
principal amount of $1,327,500 with AIP Properties #3 L.P.
as Maker and Life Investors Insurance Company as
Payee.(Westchase)
*Filed herewith.
ATTENTION: COUNTY RECORDER_THIS INSTRUMENT COVERS GOODS THAT ARE
OR WILL BECOME FIXTURES ON THE DESCRIBED REAL PROPERTY AND SHOULD
BE FILED FOR RECORD IN THE REAL PROPERTY RECORDS WHERE DEEDS OF
TRUST ON REAL ESTATE ARE RECORDED. THIS INSTRUMENT SHOULD ALSO
BE INDEXED AS A UNIFORM COMMERCIAL CODE FINANCING STATEMENT
COVERING GOODS THAT ARE OR WILL BECOME FIXTURES ON THE DESCRIBED
REAL PROPERTY. THE MAILING ADDRESSES, TELEPHONE NUMBERS, AND FAX
NUMBERS OF THE SECURED PARTY AND THE DEBTOR ARE WITHIN.
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
AIP Properties #3, L.P., a Delaware limited partnership,
Grantor
having an office at
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
to
Chicago Title Company, a California Corporation, Trustee,
for the benefit of
Life Investors Insurance Company of America, an Iowa corporation,
Beneficiary,
having an office
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Loan Amount: $27,990,000
Premises: Parcels 1 And 2 of Parcel Map 15739, Los Angeles
County, California
After recording, please return to:
Gary Whittington, Esq.
AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
AEGON Loan Number 87488
Huntington Drive
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
This Deed of Trust and Security Agreement is made and given this
___ day of November, 1996 by AIP Properties #3, L.P., a limited
partnership organized under the laws of Delaware, having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Grantor"), to Chicago Title Company, a California
corporation, as Trustee, whose mailing address is
______________________________________________ ("Trustee"), for
the benefit Life Investors Insurance Company of America, a
corporation organized under the laws of Iowa, having an office
c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223 ("Beneficiary"). The definitions
of capitalized terms used in this Deed of Trust may be found
either in Section 3 below, or through the cross-references
provided in that Section.
1. RECITALS
Under the terms of a commercial mortgage Revised Mortgage
Loan Application and Commitment dated July 18, 1996
(the "Commitment"), AEGON USA Realty Advisors, Inc.
("AEGON"), as agent for Beneficiary, agreed to fund a
loan in an original principal amount to be determined
in accordance with procedures described in the
Commitment (the "Loan").
Beneficiary has funded the Loan in the principal amount of
$27,990,000 in accordance with the Commitment, and to
evidence the Loan Grantor has executed and delivered to
Beneficiary ten promissory notes in the aggregate
amount of $27,990,000.
The Commitment requires that the Loan be secured by certain
real property and by certain tangible and intangible
personal property.
2. GRANTING CLAUSE
To secure the repayment of the Indebtedness, and in
consideration of the sum of ten dollars ($10.00) and
other valuable consideration, the receipt and
sufficiency of which are acknowledged, Grantor grants,
bargains, sells, warrants, conveys, alienates,
releases, assigns, sets over and confirms to Trustee,
in trust with the power of sale for the benefit of
Beneficiary, and to his successors and assigns forever,
the Real Property, the Leases, the Rents, the Assigned
Rights, the Condemnation Proceeds, and the Insurance
Proceeds, and grants to Beneficiary a security interest
in the Personal Property.
3. DEFINED TERMS
Appurtenant Easements
means the declarations, easements, covenants,
restrictions and agreements, if any, identified on
the attached Exhibit A.
Assigned Rights
means all of Grantor's rights (whether presently
existing or arising in the future) under all
contracts, claims and licenses that relate to the
Real Property and may benefit its owner, including
air rights, mineral rights, water rights, claims
against third parties for damages to the Property,
construction, roof and equipment guarantees and
warranties, building licenses and permits,
management contracts, service contracts, leases of
Fixtures or of Personal Property, and all of
Grantor's right, title and interest (whether
presently existing or arising in the future) in
and to unearned insurance premiums, any greater
estate in the Real Property, trade names, property
management files, accounting books and records,
trademarks, tradestyles, service marks,
copyrights, accounting books and records, site
plans, surveys, blueprints, and construction
drawings, plans and specifications, and the work
product of architects, environmental consultants,
property tax consultants, engineers, and any other
third party contractors whose services benefit the
Real Property.
Assignment of Leases and Rents
means the Loan Document bearing this heading.
Business Day
means any day when state and federal banks are
open for business in Cedar Rapids, Iowa.
Condemnation Proceeds
means all money or other property that has been,
or is in the future, awarded or agreed to be paid
or given in connection with any taking by eminent
domain of all or any part of the Real Property
(including a taking through the vacation of any
street dedication or through a change of grade of
such a street), either permanent or temporary, or
in connection with any purchase in lieu of such a
taking, or as a part of any related settlement.
Conditional Grace Period
means a period of thirty (30) days, except when
applicable to a failure of any term, condition, or
provision under this Deed of Trust which arises
from facts, circumstances, acts, or omissions
which are not the fault of Grantor, in which in
which case Conditional Grace Period shall mean a
period of sixty (60) days.
Default
means any of the acts, omissions, or circumstances
specified in Section 10 below.
Environmental Indemnity Agreements
means each of the documents captioned
"Environmental Indemnity Agreement" executed with
respect to the Real Property and the real property
encumbered by the Other Deeds of Trust.
Environmental Laws
means all present and future laws, statutes,
ordinances, rules, regulations, orders, and
determinations of any Governmental Authority
pertaining to health, underground storage tank
regulation or removal, protection of the
environment, natural resources, wetlands,
conservation, wildlife, waste management,
regulation of activities involving Hazardous
Substances, and pollution, or relating to waste
disposal or environmental protection with respect
to the exposure to, or manufacture, possession,
presence, use, generation, storage,
transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal,
remediation or handling of any Hazardous
Substances, including, without limitation, the
Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601
et seq., the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C.
9601(20)(D), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., the Federal
Water Pollution Control Act, as amended by the
Clean Water Act , 33 U.S.C. 1251 et seq., the
Clean Air Act , 42 U.S.C. 7401 et seq. and the
Toxic Substances Control Act, 15 U.S.C. 2601 et
seq., all as amended from time to time.
ESA
means the written environmental site assessment of
the Real Property prepared by a consultant hired
directly by Beneficiary under the terms of the
Commitment.
Escrow Expenses
means those expenses in respect of Insurance
Premiums and Impositions that Beneficiary elects
to pay directly from the Escrow Fund using moneys
accumulated through the collection of Monthly
Escrow Payments.
Escrow Fund
means the accounting entry maintained on the books
of Beneficiary as funds available for the payment
of Escrow Expenses under the terms of this Deed of
Trust.
Financing Statements
means the Uniform Commercial Code financing
statements filed to perfect the security interests
securing the Indebtedness, as amended or extended
from time to time.
Fixtures
means all materials, supplies, equipment,
apparatus and other items now or hereafter
attached to or installed on the Real Property in a
manner that causes them to become fixtures under
the law of California, including all built-in or
attached furniture or appliances, elevators,
escalators, heating, ventilating and air
conditioning system components, emergency
electrical generators and related fuel storage or
delivery systems, septic system components, storm
windows, doors, electrical equipment, plumbing,
water conditioning, lighting, cleaning, snow
removal, lawn, landscaping, irrigation, security,
incinerating, firefighting, sprinkler or other
fire safety equipment, bridge cranes or other
installed materials handling equipment, satellite
dishes or other telecommunication equipment, built-
in video conferencing equipment, sound systems or
other audiovisual equipment, and cable television
distribution systems. Fixtures do not include
trade fixtures, office furniture and office
equipment owned by tenants and neither necessary
nor desirable for the operation of the Real
Property as income-producing commercial real
estate.
Governmental Authority
means any political entity with the legal
authority to impose any requirement on the
Property, including the governments of the United
States, the State of California, Los Angeles
County, the City of Monrovia, and any other entity
with jurisdiction to decide, regulate, or affect
the ownership, construction, use, occupancy,
possession, operation, maintenance, alteration,
repair, demolition or reconstruction of any
portion or element of the Real Property.
Hazardous Substances
means: (A) any hazardous wastes or toxic
chemicals, materials, substances or wastes as
defined by the Environmental Laws; (B) any "oil,"
as defined by the Clean Water Act and regulations
promulgated thereunder (including crude oil or any
fraction of crude oil); (C) any substance, the
presence of which is now or in the future
prohibited, regulated or controlled by any
Environmental Law or any other law, regulation,
statute or ordinance of any Governmental
Authority; (D) any asbestos or asbestos containing
materials, (E) any polychlorinated biphenyls
("PCBs"), (E) urea formaldehyde, (F) atmospheric
radon at levels over four picocuries per cubic
liter; (G) any solid, liquid, gaseous or thermal
irritant or contaminant, such as smoke, vapor,
soot, fumes, alkalis, acids, chemicals,
pesticides, herbicides, sewage, industrial sludge
or similar wastes, and (H) any industrial, nuclear
or medical by-products. However, "Hazardous
Substances" include neither (a) immaterial
quantities of automotive motor oil leaked
inadvertently from vehicles in the ordinary course
of the operation of the Real Property and cleaned
up in accordance with reasonable property
management procedures and any applicable law nor
(b) immaterial quantities of substances
customarily and prudently used in the cleaning and
maintenance of the Real Property in accordance
with any applicable law.
Impositions
means all real and personal property taxes;
general or special assessments; ground rent;
water, gas, sewer, vault, electric or other
utility rates and charges; common charges; owners'
association dues or fees; ground rent; personal
and ad valorem property taxes; fees for any
easement, license or agreement maintained for the
benefit of the Property; and any and all other
taxes, levies, user fees, claims, charges and
assessments whatsoever that at any time may be
assessed, levied or imposed on the Property or
upon its ownership, use, occupancy or enjoyment,
and any related costs, interest or penalties.
Improvements
means all buildings and improvements of any kind
erected or placed on the Land now or in the
future, including the Fixtures, together with all
appurtenant rights, privileges, easements,
tenements, hereditaments, titles, reversions,
remainders and other interests.
Indebtedness
means all sums that are owed or become due
pursuant to the terms of the Notes, this Deed of
Trust, or any of the other Loan Documents,
including scheduled principal payments, scheduled
interest payments, default interest, late charges,
prepayment premiums, accelerated or matured
principal balances, advances, collection costs,
receivership costs, fees and costs of the Trustee
and all other financial obligations of Grantor
incurred in connection with the Loan transaction.
Indemnity Agreements
means each of the documents captioned "Indemnity
Agreement" executed by American Industrial
Properties REIT of even date herewith.
Insurance Premiums
means all premiums or other charges required to
maintain in force any and all insurance policies
that this Deed of Trust requires that Grantor
maintain.
Insurance Proceeds
means all proceeds of all insurance now or
hereafter carried by or payable to Grantor with
respect to the Property, or the interruption of
rents or income derived from the Property, all
unearned insurance premiums and all related claims
or demands.
Land
that certain tract of land located in Monrovia,
Los Angeles County, California, which is described
on the attached Exhibit A, together with all
appurtenances, including all Grantor's right,
title and interest to and in the air space above
the Land and all alley, party wall, drainage,
sewer, mineral, water, oil and gas, vault and
other rights, estates, titles, interests,
privileges, easements, tenements, hereditaments,
titles, royalties, reversions, remainders and
other interests.
Leases
means all leases, subleases, licenses,
concessions, extensions, renewals and other
agreements (whether written or oral, and whether
presently effective or made in the future) through
which Grantor grants any possessory interest in
and to, or any right to occupy or use, all or any
part of the Real Property, and any related
guaranties.
Legal Requirements
means all laws, statutes, rules, regulations,
ordinances, judicial decisions, administrative
decisions, building permits, development permits,
certificates of occupancy, or other requirements
of any Governmental Authority.
Loan Agreement
means that certain Loan Agreement of even date
herewith, by and among, Grantor, Beneficiary, and
American Industrial Properties REIT, wherein
Beneficiary agrees to make the Loan to Grantor.
Loan Documents
means all documents evidencing the Loan or
delivered in connection with the Loan (including
the Notes, this Deed of Trust, and the Other Deeds
of Trust), whether entered into at the closing of
the Loan or in the future, other than the
Environmental Indemnity Agreements and the
Indemnity Agreements, which are not Loan Documents
and are not secured hereby.
Monthly Escrow Payment
means the sum of the Monthly Imposition
Requirement, the Monthly Insurance Premium
Requirement, and the Monthly Reserve Requirement.
Monthly Imposition Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and, if future Impositions are as
yet undetermined, on a 5% annual inflation factor)
will be required to permit the timely payment of
the Impositions by Beneficiary.
Monthly Insurance Premium Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and using, if future Insurance
Premiums are as yet undetermined, a 5% inflation
factor) will be required to permit the timely
payment of the Insurance Premiums by Beneficiary.
Monthly Reserve Requirement
means the amount that Beneficiary estimates will,
over the subsequent twelve months, result in the
accumulation of a surplus in the Escrow Fund equal
to one-sixth of the sum of the Annual Imposition
Requirement and the Annual Insurance Premium
Requirement.
Note
means any one of the ten promissory notes made by
Grantor in the aggregate amount of $27,990,000,
together with all extensions and modifications. .
Notes
means the ten promissory notes made by Grantor in
the aggregate amount of $27,990,000, together with
all extensions and modifications of any one or
more of them.
Notice
means a notice given in accordance with the
provisions of Subsection 25.11.
Obligations
means all of the obligations required to be
performed under the terms and conditions of any of
the Loan Documents by any person other than the
Trustee or Beneficiary.
Obligor
means Grantor or any other natural person, trust
or business organization that is liable under the
Loan Documents for the payment of any portion of
the Indebtedness, or the performance of any other
Obligation, under any circumstances.
Other Deeds of Trust
means the three other Deeds of Trust and Security
Agreements executed by Grantor of even date
herewith for the benefit of Beneficiary as
security for the Notes and encumbering, inter
alia, real property owned by Grantor in the States
of Texas and Maryland.
Permitted Encumbrances
means the encumbrances or other matters listed on
Exhibit B.
Permitted Transfer
means a transfer specifically described in Section
11 as permitted.
Personal Property
means all materials, appliances, equipment or
items located at the Real Property now or in the
future and that may be incorporated in the Real
Property through construction, attachment, or
installation, or that are used, or are capable of
being used, in the operation of the Real Property
as commercial real estate, including (i)
appliances, equipment or items required under any
lease to be provided by Grantor to any tenant,
(ii) materials or equipment for use in the
maintenance, alteration, landscaping or repair of
the Real Property, including snow removal, lawn,
landscaping, irrigation, security, incineration,
and hazardous waste storage, monitoring, testing,
containment or abatement supplies and equipment;
(iii) electrical lights and fixtures (whether or
not permanently wired), backup generators and
related fuel storage and delivery systems, (iv)
rugs, carpeting, office furnishings, art work,
decorations, window treatments and equipment
located in any on-site leasing office, located in
any lobby, hall or other common area, or used in
connection with any "executive suites" operation,
(v) vehicles used to transport prospective tenants
or to maintain or operate the Real Property, (vi)
components of heating, ventilation and air
conditioning systems and air quality testing
equipment, (vii) spare or detached parts for
elevators, escalators or other mechanical systems,
(viii) all site or building plans and
specifications, construction records, and
architectural or engineering drawings relating to
the Real Property, (ix) sewer or septic system
components, (x) water wells, whether for purposes
of water supply or groundwater testing or
sampling, (xi) components of plumbing and water
conditioning systems, (xii) firefighting,
sprinkler or other fire safety equipment, (xiii)
central telephone switches, antennae, satellite
dishes or other telecommunication equipment, and
(xiv) video conferencing equipment, audio
equipment and cable television distribution
systems.
Property
means the Real Property, the Personal Property,
the Leases, the Rents, the Assigned Rights, the
Condemnation Proceeds and the Insurance Proceeds.
Real Property
means the Land, the Improvements, the Fixtures,
and all of Grantor's right, title and interest to
all appurtenant rights, privileges, tenements,
hereditaments, easements, or other interests that
run with the Land, including any Appurtenant
Easements, benefits of railroad sidings, drainage
rights, sewer rights and rights of ingress and
egress.
Recourse Obligations
means the recourse obligations, or "carveouts,"
that are defined in the Notes and in Section 21.
Rents
means all rents, lease termination fees, proceeds
of letters of credit or other devices securing
future rental payments, revenues, income,
proceeds, royalties, profits and other benefits
paid or payable for using, leasing, licensing,
possessing, operating from or in, residing in,
selling, mining, extracting, or otherwise enjoying
the Real Property, whether presently existing or
arising in the future, to which Grantor may now or
hereafter become entitled or may demand or claim.
Threshold Number
means $250,000.
Trustee
means Chicago Title Company, a California
corporation and its successors and assigns.
4. TITLE
Grantor represents to and covenants with Beneficiary and
with its successors and assigns, that at the point in
time of the grant of the lien created by this Deed of
Trust, Grantor is well seized of good and indefeasible
estate to the Real Property, in fee simple absolute,
subject to no lien or encumbrance except the Permitted
Encumbrances. Grantor has good and merchantable title
to the Personal Property, and has the uncontestable
right to grant a first priority security interest in
the Personal Property, free of any rights of lessors or
of sellers under conditional sales contracts or other
financing arrangements. Grantor warrants this estate
and title to Beneficiary and to its successors and
assigns forever, against all lawful claims and demands.
Grantor shall maintain mortgagee title insurance from a
solvent carrier, insuring Beneficiary in the amount of
$4,575,000 or such lesser amount agreed upon by
Beneficiary, that the Deed of Trust constitutes the
first and best lien on the Real Property. This Deed of
Trust is and shall remain a valid and enforceable first
lien on the Real Property, and if the validity or
enforceability of this first lien is attacked or called
into question, Grantor shall diligently and
continuously defend it through appropriate proceedings.
Should it fail to do so, Beneficiary may at Grantor's
expense take all necessary and proper action, including
the engagement and compensation of legal counsel, the
prosecution or defense of litigation, and the
compromise or discharge of claims. Grantor shall
defend, indemnify and hold Beneficiary harmless in any
suit or proceeding brought to challenge or attack the
validity, enforceability or priority of the lien
granted by this Deed of Trust. If a prior mechanics'
or materialmen's lien on the Real Property arises by
operation of statute during any construction or repair
of the Improvements, Grantor shall either cause the
lien to be discharged by paying when due any amounts
owed to such persons, or shall comply with Section 12
of this Deed of Trust.
5. REPRESENTATIONS AND WARRANTIES
Grantor (i) represents to Beneficiary, and to its successors
and assigns, that the following statements are true as
of the date of this Deed of Trust, and (ii) warrants to
Beneficiary, and to its successors and assigns, that
the following statements shall remain true during the
term of the Loan:
5.1 Formation and Existence
Grantor is a limited partnership duly formed
and validly existing under the laws of
Delaware, is duly qualified to do
business in and is in good standing
under, the laws of California, and has
obtained all licenses and permits and
filed all statements of fictitious name
and registrations necessary for the
lawful operation of its business.
5.2 Power and Authority
Grantor has full power and authority to carry
on its business as presently conducted,
to own the Property, to execute and
deliver the Loan Documents that it has
executed, and to perform its obligations
under them.
5.3 Due Authorization
The Loan transaction and the performance of
all of Grantor's obligations under the
Loan Documents have been duly authorized
by all requisite partnership action, and
each individual executing any Loan
Document on behalf of Grantor has been
duly authorized to do so.
5.4 No Default or Violations
The execution and performance of Grantor's
obligations under the Loan Documents
will not result in any breach of, or
constitute a default under, any
contract, agreement, document or other
instrument to which Grantor is a party
or by which Grantor may be bound or
affected, and do not and will not
violate or contravene any law to which
Grantor is subject; nor do any such
other instruments impose or contemplate
any obligations which are or will be
inconsistent with the Loan Documents.
5.5 No Further Approvals or Actions Required
No approval by, authorization of, or filing
with any federal, state or municipal or
other governmental commission, board or
agency or other governmental authority
is necessary in connection with the
authorization, execution and delivery of
the Loan Documents by Grantor.
5.6 Due Execution and Delivery
Each of the Loan Documents to which Grantor
is a party has been duly executed and
delivered on behalf of Grantor.
5.7 Legal, Binding, Valid and Enforceable
Each of the Loan Documents to which Grantor
is a party constitutes the legal, valid
and binding obligation of Grantor,
enforceable against Grantor in
accordance with its terms, except to the
extent that its enforceability may be
limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization,
moratorium or similar laws affecting the
enforceability of creditors' rights
generally or by equitable principles of
general application (whether considered
in an action at law or in equity).
5.8 Accurate Financial Information
All financial information furnished by
Grantor to Beneficiary in connection
with the application for the Loan is
true, correct and complete in all
material respects and does not omit to
state any fact or circumstance necessary
to make the statements in them not
misleading, and there has been no
material adverse change in the financial
condition of Grantor since the date of
such financial information.
5.9 Compliance with Legal Requirements
All governmental approvals, and licenses
required in order for Grantor to conduct
its business and maintain and operate
the Real Property in compliance with
applicable law are in full force and
effect, and the Real Property currently
is being operated in compliance with all
applicable legal requirements in all
material respects.
5.10 Contracts and Franchises
All contracts and franchises necessary in
order for Grantor to conduct its
business and operate the Real Property
in accordance with good commercial
practice are in force.
5.11 No Condemnation Proceeding
Grantor has no knowledge of any present,
pending or threatened condemnation
proceeding or award affecting the Real
Property.
5.12 No Casualty
No damage to the Real Property by any fire or
other casualty has occurred and remained
unrepaired.
5.13 Complete Lots and Tax Parcels
The Land is comprised exclusively of tax
parcels that are entirely included
within the Land, and of subdivision lots
that are entirely included within the
Land.
6. COVENANTS
6.1 Payment and Performance
Grantor shall pay the Indebtedness and
perform all of its other obligations
under the Loan Documents, as and when
the Loan Documents require such payment
and performance.
6.2 Payment of Impositions
Grantor shall pay the Impositions on or
before the last day on which they may be
paid without penalty or interest, and
shall, within thirty days of such
payment, furnish Beneficiary with a paid
receipt or a canceled check as evidence
of payment. If Beneficiary does not
receive such evidence, Beneficiary may
secure it directly. If it does so,
Beneficiary will charge Grantor an
administrative fee of $250 for securing
the evidence of payment. This fee will
be a demand obligation under the terms
of this Deed of Trust. Grantor may meet
the requirements of this Subsection by
remitting the Monthly Escrow Payments
when due, by immediately providing
notice to Beneficiary of any new
Imposition or increased Imposition
unknown to Beneficiary, and by paying to
Beneficiary on demand any amount
required to increase the Escrow Fund to
an amount sufficient to permit
Beneficiary to pay all Impositions from
the Escrow Fund on time. If Grantor
wishes to contest the validity or amount
of an Imposition, it may do so by
complying with Section 12.
If any new Legal Requirement taxes the Deed
of Trust so that the yield on the
Indebtedness would be reduced, and
Grantor may lawfully pay the tax or
reimburse Beneficiary for its payment,
Grantor shall do so.
6.3 Maintenance of the Real Property
Grantor shall not commit or permit any waste
of the Real Property as a physical or
economic asset, and agrees to maintain
in good repair the Improvements,
including structures, roofs, mechanical
systems, parking lots or garages, and
other components of the Real Property
that are necessary or desirable for the
use of the Real Property, or which
Grantor as landlord under any Lease is
required to maintain for the benefit of
any tenant. In its performance of this
obligation, Grantor shall promptly and
in a good and workmanlike manner repair
or restore any elements of the
Improvements that are damaged or
destroyed as required under Subsection
6.4. Grantor shall also replace roofs,
parking lots, mechanical systems, and
other elements of the Real Property
requiring periodic replacement. Grantor
shall carry out such replacements no
less frequently than would any
commercially reasonable owner intending
to maintain the maximum income-
generating potential of the Real
Property over its reasonable economic
life. Grantor shall not, without the
prior written consent of Beneficiary,
demolish, reconfigure, or materially
alter the Improvements, but Beneficiary
agrees that any request for its consent
to such an action shall be deemed given
if Beneficiary declines to respond
within fifteen (15) Business Days to any
written request for such a consent, if
the request is accompanied by all
materials required to permit Beneficiary
to analyze the proposed action.
6.4 Use of the Real Property
Grantor shall cause the Real Property to be
used as a service center, office, or
warehouse property and for no other
purpose.
6.5 Independence of the Real Property
Grantor shall maintain the independence of
the Real Property from other land and
improvements not included within or
located on the Land. In fulfilling this
covenant, Grantor shall neither take any
action which would make it necessary to
own or control any property other than
the Real Property in order to meet the
obligations of the landlord under any
Lease, or in order to comply with the
Legal Requirements, nor take any action
which would cause any land or
improvements other than the Land and the
Improvements to rely upon the Land or
the Improvements for those purposes, nor
impair the integrity of the Land as one
or more complete subdivided lots and tax
parcels.
6.6 Rebuilding upon Casualty and Remediation of Effect of
Condemnation
If a casualty occurs, Grantor shall rebuild
the Improvements. If any portion of the
Real Property is taken by power of
eminent domain, Grantor shall remedy its
effects. In either case, the rebuilding
or remediation shall restore the Real
Property's value and potential to
generate income in proportion to the
amount of the Indebtedness remaining
after any application of Insurance
Proceeds or Condemnation Proceeds to the
Indebtedness.
6.7 Performance of Landlord Obligations
Grantor shall perform its obligations as
landlord under the Leases, and shall
neither take any action, nor fail to
take any action, if the action or
failure would be inconsistent with the
commercially reasonable management of
the property for the purpose of
enhancing its long-term performance and
value. Grantor shall not, without
Beneficiary's written consent, extend,
modify, terminate or enter into any
lease of the Real Property, except in
compliance with the Agreement Regarding
Leasing, which Beneficiary and Grantor
have entered into today, and which
grants certain rights, personally, to
Grantor.
6.8 Financial reports and Operating Statements
During the term of the Loan, Grantor shall
maintain complete and accurate
accounting and operational records,
including copies of all Leases and other
written contracts relating to the Real
Property, copies of all tax statements,
and evidence to support the payment of
all material property-related expenses.
Within 120 days of the end of each
fiscal year, Grantor shall deliver to
Beneficiary (A) copies of the
consolidated financial statements of
Grantor and its general partner,
prepared by an independent certified
public accountant in accordance with
generally accepted accounting
principles, consistently applied, (B) a
complete and accurate operating
statement for the Real Property, and (C)
a complete rent roll (listing tenants,
unit numbers, square feet occupied and
leased, rents, delinquencies, vacancies,
other income received and expenses), all
certified as true and correct by Grantor
and in form satisfactory to Beneficiary.
If Grantor fails to deliver the items
required in this Subsection, Beneficiary
may engage an accounting firm to prepare
the required items. In connection with
the engagement of this firm and its
supervision, Grantor shall pay
Beneficiary an administrative fee of
$1,000. Grantor shall cooperate fully
with any investigative audit required to
permit the accounting firm to produce
these items, and the fees and expenses
incurred in connection with their
preparation shall be paid by Grantor on
demand.
7. INSURANCE REQUIREMENTS
At all times until the Indebtedness is paid in full, Grantor
shall maintain insurance coverage and administer
insurance claims in compliance with this Section.
7.1 Required Coverages
(a) All Risk/Open Perils Special Form Property
Grantor shall maintain coverage of
100% of the replacement cost
of all insurable elements of
the Real Property all tangible
Personal Property. If a
coinsurance clause is in
effect, an agreed amount
endorsement is required.
Blanket policies must include
limits by property location.
Coverage shall extend to the
Real Property and to all
tangible Personal Property.
(b) Broad Form Boiler and Machinery
If any such item is located on or
about the Real Property,
Grantor shall maintain this
coverage, including a form of
business income coverage.
(c) Flood
If the Real Property is located in
a special flood hazard area
according to the most current
flood insurance rate map
issued by the Federal
Emergency Management Agency
and if flood insurance is
available, Grantor shall
maintain flood insurance
coverage of all insurable
elements of Real Property and
of all tangible Personal
Property.
(d) Business Interruption
Grantor shall maintain a form of
business income coverage in
the amount of 80% of one
year's business income from
the Property. Blanket
policies must include limits
by property location.
(e) Comprehensive/general liability
Grantor shall maintain such
coverage (which may be in the
form of umbrella/excess
liability insurance) with a
$1,000,000 combined single
limit per occurrence and a
minimum aggregate limit of
$2,000,000.
(f) Liquor liability
Grantor shall maintain such
coverage, if applicable law
may impose liability on those
selling, serving, or giving
alcoholic beverages to others
and if such beverages will be
sold, served or given on the
Real Property by Grantor.
(g) Elective coverages
Beneficiary may require additional
coverages appropriate to the
property type and site
location. Additional
coverages may include
earthquake, mine subsidence,
sinkhole, personal property,
supplemental liability, or
coverages of other property-
specific risks.
7.2 How Beneficiary Should Be Named
On all property policies and coverages
(including coverage against loss of
business income), Beneficiary must be
named as "first mortgagee" under a
standard mortgage clause. On all
liability policies and coverages,
Beneficiary must be named as an
"additional insured." Beneficiary should
be referred to verbatim as follows:
"Life Investors Insurance Company of
America and its successors, assigns, and
affiliates; as their interest may
appear; c/o AEGON USA Realty Advisors,
Inc.; Mortgage Loan Dept.; 4333 Edgewood
Rd., NE; Cedar Rapids, Iowa 52499-
5223."
7.3 Rating
Each insurance carrier must be rated A, Class
XII, or better by Best's Rating Service,
without regard to its parent's or any
reinsurer's rating.
7.4 Deductible
The maximum deductible on all coverages and
policies is $25,000.
7.5 Notices, Changes and Renewals.
All policies must require the insurance
carrier to give Beneficiary a minimum of
thirty (30) days notice in the event of
cancellation or non-renewal. Grantor
shall report to Beneficiary immediately
any vacancy, change of title, tenant
occupancy or use, physical damage,
additional improvements or other factors
affecting any insurance contract. An
original or certified copy of each
policy is required upon renewal. If no
such copy is available, Beneficiary will
accept a binder for a period not to
exceed 90 days. All binders,
certificates of insurance, and original
or certified copies of policies must
name Beneficiary as a named insured, or
as an additional insured, must include
the complete and accurate property
address and must bear the original
signature of the issuing insurance
agent.
7.6 Unearned Premiums
If this Deed of Trust is foreclosed,
Beneficiary may at its discretion cancel
any of the insurance policies required
under this Section and apply any
unearned premiums to the Indebtedness.
7.7 Forced Placement
If Grantor fails to comply with the
requirements of this Section,
Beneficiary may, at its discretion,
procure any required insurance. Any
premiums paid for such insurance, or the
allocable portion of any premium paid by
Beneficiary under a blanket policy for
such insurance, shall be a demand
obligation under this Deed of Trust, and
any unearned premiums under such
insurance shall comprise Insurance
Proceeds and therefore a portion of the
Property.
8. INSURANCE AND CONDEMNATION PROCEEDS
8.1 Adjustment of Insurance Claims and Compromise of
Condemnation Awards
Grantor may settle any insurance claim or
condemnation proceeding if the effect of
the casualty or the condemnation may be
remediated for $50,000 or less. If a
greater sum is required, Grantor may not
settle any such claim or proceeding
without the advance written consent of
Beneficiary. If a Default exists,
Grantor may not settle any insurance
claim or condemnation proceeding without
the advance written consent of
Beneficiary.
8.2 Direct Payment to Beneficiary of Proceeds
If the Insurance Proceeds received in
connection with a casualty or the
Condemnation Proceeds received in
respect of a condemnation exceed
$50,000, or if there is a Default, then
such proceeds shall be paid directly to
Beneficiary. Beneficiary shall have the
right to endorse instruments that
evidence proceeds which it is entitled
to receive directly.
8.3 Availability to Grantor of Proceeds
Grantor shall have the right to use the
Insurance Proceeds or the Condemnation
Proceeds to rebuild the Improvements
following a casualty, or the remedy the
effect on the Real Property of any
condemnation, if the amount received is
less than the Threshold Number, provided
(a) no condition of Default then exists,
(b) no Default with respect to any
payment obligation under any of the Loan
Documents shall have occurred during the
preceding twelve months, (c) no
nonmonetary default shall have occurred,
been noticed and remained uncured beyond
the applicable cure period and (d) the
proceeds received by Beneficiary,
together with any additional funds
deposited with Beneficiary by Grantor,
are then sufficient, in Beneficiary's
discretion, to restore the Improvements
to their condition before the casualty,
or to remedy the effect on the Real
Property of the condemnation.
Beneficiary may condition disbursements
on approval of plans and specifications,
minimum disbursement requirements,
submittal of certificates of occupancy
and other appropriate evidence of
completion, updating of Beneficiary's
mortgagee title insurance coverage to
insure the absence of mechanics' or
materialmen's liens, disbursement on a
percentage of completion basis with a
ten percent holdback on all
disbursements pending final completion,
and other customary safeguards for
construction lenders. All transactional
expenses shall be paid by Grantor. If
the amount received in respect of a
casualty or condemnation equals or
exceeds the Threshold Number, then such
proceeds may, at Grantor's option, be
used to rebuild or to remedy subject to
all of the provisions and procedures
described above, but only if the Loan-to-
Value ratio of the Property on
completion will be 75% or less, as
determined by Beneficiary based on its
appraisal review, as determined by
repeating the appraisal procedure
described in Section 4.2.1 of the
Commitment. If necessary, Grantor shall
make a prepayment of the Loan, without
premium, sufficient to achieve this Loan-
to-Value ratio. The independent fee
appraisal shall be at Grantor's expense,
and Grantor shall pay Beneficiary an
administrative fee of $2,500 in
connection with its review. Beneficiary
may require that Grantor deposit $10,000
with Beneficiary as security for these
expenses or may pay the fee appraiser's
and administrative fees from the
proceeds at its sole discretion.
Unless Grantor has the right to use the
Insurance Proceeds or the Condemnation
Proceeds under the foregoing paragraph,
Beneficiary may, in its sole and
absolute discretion, either apply them
to the Loan balance or disburse them for
the purposes of repair and
reconstruction, or to remedy the effects
of the condemnation. No prepayment
premium will be charged on amounts
applied to reduce the principal balance
of the Loan.
9. ESCROW FUND
Grantor shall pay the Monthly Escrow Payment on the first
day of every month, commencing January 1, 1997. Any
Monthly Escrow Payment received after the tenth day of
the month in which it is due shall be subject to a late
charge of five percent, which shall not be applied to
the Escrow Fund. Beneficiary shall hold Monthly Escrow
Payments in a fund from which Beneficiary will pay
Escrow Expenses that Beneficiary has anticipated will
become payable on a regular basis during the Loan's
term, and on which Beneficiary has based its
determination of the Monthly Imposition Requirement,
the Monthly Insurance Premium Requirement and the
Monthly Reserve Requirement. The Escrow Fund will be
maintained as an accounting entry in Beneficiary's
general account, where it may be commingled with
Beneficiary's other funds. Beneficiary may reanalyze
the projected Escrow Expenses from time to time and
shall advise Grantor of any change in the amount of the
Monthly Escrow Payment. Grantor hereby grants to
Beneficiary a security interest in the Escrow Fund and
agrees that, upon the foreclosure of the Deed of Trust,
the delivery of a deed in lieu of foreclosure, or the
payoff of the Loan, Beneficiary may apply amounts in
the Escrow Fund, net of accrued Escrow Expenses, to the
Indebtedness. Beneficiary shall remit any amounts in
excess of the Indebtedness to Grantor.
10. DEFAULT
10.1 Existence of Default
A Default shall exist immediately upon the
occurrence of any of the acts, omissions
or circumstances specified in Subsection
10.2 or in Subsection 10.4. Upon the
occurrence of any of the acts, omissions
or circumstances specified in Subsection
10.3, Beneficiary may deliver written
Notice to Grantor of the existence of
such an act, omission or circumstance,
and that such an act, omission or
circumstance shall, if uncured within
the Conditional Grace Period, constitute
a Default under the Loan Documents. A
Default shall exist if the act, omission
or circumstance has not been cured prior
to expiration of the Conditional Grace
Period, or if, following such Notice,
Grantor either ceases to pursue the cure
of such an act, omission or circumstance
with diligence, or repudiates its
obligation to effect such a cure.
10.2 Monetary Defaults
A monetary default shall exist upon any of
the following:
(a) Monthly Principal and Interest Payments
Grantor's failure to pay, or to
cause to be paid, any regular
monthly payment of principal
and interest due under the
Notes, or any required Monthly
Escrow Payment, so that
Beneficiary receives the
payment on or before the tenth
day of the month in which the
payment is due;
(b) Matured Indebtedness
Grantor's failure to pay, or to
cause to be paid, the
Indebtedness when the Loan
matures by acceleration under
Section 13, because of a
transfer or encumbrance under
Section 16, or by lapse of
time;
(c) Demand Obligations
Grantor`s failure to pay, or to
cause to be paid, within five
Business Days of Beneficiary's
written demand, any other
amount due under this Deed of
Trust or any of the other
Loan Documents;
10.3 Curable Nonmonetary Default
A curable nonmonetary default shall exist
upon any of the following:
(a) Entry of a Material Judgment
The entry of any judgment against
Grantor or any other Obligor,
if the judgment may materially
and adversely affect the
value, use or operation of the
Real Property;
(b) Tax Lien
The filing of any federal, state or
local tax lien against Grantor
or any other Obligor, or
against the Real Property.
(c) Failure of Warranty
Any representation made in Section
5 or warranted in any other
Loan Document shall become
untrue or misleading in any
material respect.
(d) Other Defaults
Grantor's failure to observe any
promise or covenant made in
this Deed of Trust or any
other Loan Document, if the
failure is not described in
Subsection 10.2, in Subsection
10.4, or elsewhere in this
Subsection 10.3.
10.4 Incurable Nonmonetary Default
An incurable nonmonetary default shall exist
upon any of the following:
(a) Material Untruth or Misrepresentation
Beneficiary`s discovery that any
representation made by Grantor
or by any other Obligor in any
Loan Document in connection
with the Loan was untrue or
misleading in any material
respect at the time it was
made.
(b) Voluntary Bankruptcy Filing
The filing by Grantor or by any
other Obligor of a petition in
bankruptcy or for relief from
creditors under any present or
future law that affords
general protection from
creditors.
(c) Involuntary Bankruptcy or Similar Filing
Grantor or any other Obligor
becomes the subject of an
involuntary petition in
bankruptcy or of any other
action that may result in a
composition of its debts, that
may provide for the marshaling
of its assets for the
satisfaction of Grantor's or
such other Obligor's debts, or
that may result in the
judicially ordered sale of the
its assets for the purpose of
satisfying its obligations to
creditors, unless a motion for
the dismissal of the petition
or other action is filed
within ten days and results in
its dismissal within sixty
days of the filing of the
petition or other action.
(d) Insolvency
An adjudication that Grantor or any
other Obligor is insolvent.
(e) Receivership
The appointment of a receiver or
trustee to take possession of
any of the assets of Grantor
or of any other Obligor unless
a motion for the dismissal of
the appointment is filed
within ten days and results in
dismissal of the receiver or
trustee within thirty days of
the filing of the petition or
other action.
(f) Levy or Attachment
The taking or seizure of any
material portion of the
Property under levy of
execution or attachment unless
a motion for the dismissal of
the petition or other action
is filed within ten days and
results in its dismissal
within ten days of the filing
of the petition or other
action.
(g) Death, Dissolution or Liquidation
The dissolution or liquidation of
any Obligor that is not a
natural person, or the
cessation of its legal
existence shall cease, or the
death of any Obligor who is a
natural person (unless the
dissolution, liquidation,
cessation or death results in
a Permitted Transfer).
(h) Abandonment
Grantor's abandonment of the Real
Property.
(i) Impairment of the Lien by Legal Requirement
The promulgation by any
Governmental Authority of a
Legal Requirement, or a ruling
by a court of competent
jurisdiction, if the effect of
the Legal Requirement or
ruling is to make the payment
of the Indebtedness unlawful
or usurious, to prevent
Grantor or any other Obligor
from legally performing any
material obligation under any
Loan Documents, to materially
impair the right of
Beneficiary to accelerate the
Indebtedness upon the
occurrence of a material
Default, or to materially
impair the right of
Beneficiary, upon the failure
of Grantor to pay the
Indebtedness at its maturity
through acceleration or lapse
of time, to cause the sale of
the Real Property and the to
apply the proceeds of the sale
to the Indebtedness.
(j) Impairment of Yield through Taxation
The promulgation of any Legal
Requirement that taxes the
Deed of Trust so that the
yield on the Indebtedness
would be reduced, if Grantor
may neither lawfully pay the
tax nor lawfully reimburse
Beneficiary for its payment..
(k) Proceeding to Contest Lien
Grantor's institution of any
proceeding to contest the
validity of Beneficiary's lien
on the Property.
11. RIGHT TO CURE
Upon Default or upon the failure of Grantor, following a
notice given under Subsection 10.3, to diligently
pursue the cure of any act, omission or circumstance
that may cause Default, Beneficiary shall have the
right to cure the Default or the act, omission or
circumstance. The expenses of doing so shall be part
of the Indebtedness, and Grantor shall pay them to
Beneficiary on demand.
12. CONTEST RIGHTS
Grantor may secure the right to contest Impositions and
mechanics' or materialmen's liens, through appropriate
proceedings conducted in good faith, by depositing with
Beneficiary an amount equal to 125% of the amount of
the Imposition or the lien, or by depositing a bond or
other security acceptable to Beneficiary in its sole
discretion. If the contest of the related Imposition
or lien is unsuccessful, Beneficiary shall use the
amount deposited, or the proceeds of the bond or other
security, to pay the Imposition or to satisfy the
obligation from which the lien has arisen. Any surplus
shall be refunded to Grantor.
13. DUE ON TRANSFER OR ENCUMBRANCE
Except as expressly permitted by the terms of the Loan
Agreement, upon the sale of any portion of the Real
Property, or upon any other conveyance, transfer or
vesting of any direct or indirect interest in Grantor
or the Property, including (i) the direct or indirect
transfer of, or the granting of a security interest in,
the ownership of Grantor, (ii) any encumbrance (other
than a Permitted Encumbrance) of the Real Property and
(iii) the granting of any security interest in the
Property, the Indebtedness shall, at Beneficiary's
option, become immediately due and payable without
notice, unless the sale, conveyance, transfer or
vesting is a Permitted Transfer.
14. PERMITTED TRANSFER
14.1 Certain Transfers of Limited Partnership Interests
Transfers of limited partnership interests in
Grantor that do not result in a loss of
American Industrial Properties REIT's
majority control of Grantor shall
constitute Permitted Transfers.
14.2 Transfer to an Approved Purchaser
Grantor shall have the right, on one occasion
during the term of the Loan, to sell or
transfer the Property (together with all
other real and personal property then
securing the Notes) in a transaction
approved by Beneficiary. Beneficiary
agrees to approve a transfer if the
following conditions are satisfied:
(a) No Default
No Default shall exist, and no act,
omission or circumstance shall
exist which, if uncured
following notice and the
passage of time, would become
a Default.
(b) Request and Supporting Materials
Beneficiary shall receive a written
request for its approval at
least sixty days in advance
notice of the proposed
transfer. The request shall
specify the identity of the
proposed transferee and the
terms of the transaction, and
shall be accompanied by the
financial statements, tax
returns, and organizational
documents of the proposed
transferee and its principals.
(c) Criteria to be Considered
The financial strength, credit
history and demonstrated
property management expertise
of the proposed transferee and
its principals shall be
satisfactory to Beneficiary in
its sole discretion.
Beneficiary expressly reserves
the right to withhold its
approval of the proposed
transfer if the proposed
transferee or any of its
principals is or has been the
subject of any bankruptcy,
insolvency, or similar
proceeding.
(d) Assumption Agreement
Under the terms of the proposed
transfer, the proposed
transferee shall assume the
Loan, without modification,
under the terms of an
assumption agreement and
additional documentation
satisfactory to Beneficiary in
form and substance.
(e) Retention of Recourse Obligations
Under the terms of the assumption
agreement and additional
documentation, liability for
Recourse Obligations arising
after the date of the transfer
and assumption shall be
assumed by the principals of
the proposed transferee, and
liability for Recourse
Obligations arising before or
in connection with the
transfer shall be retained by
those liable for them before
the transfer.
(f) Title Insurance Endorsement
Grantor shall agree to provide an
endorsement to Beneficiary's
mortgagee title insurance
policy, insuring the continued
validity and priority of the
Deed of Trust following the
assumption.
(g) Assumption Fee
Beneficiary shall receive an
assumption fee of 1.25 percent
of the outstanding balance of
the Loan at the time of the
sale or transfer, and Grantor
shall agree to reimburse
Beneficiary's out-of-pocket
expenses incurred in
connection with the proposed
transfer, including title,
recording, and attorneys'
fees, regardless of whether
the transfer is consummated.
15. NOTICE OF ASSIGNMENT OF LEASES AND RENTS
Under the Assignment of Leases and Rents, Grantor has
assigned to Beneficiary, and to its successors and
assigns, all of Grantor's right and title to, and
interest in, the Leases, including all rights under the
Leases and all benefits to be derived from them. The
rights assigned include all authority of Grantor to
modify or terminate Leases, or to exercise any
remedies, and the benefits assigned include all Rents.
This assignment is present and absolute, but under the
terms of the Assignment of Leases and Rents,
Beneficiary has licensed Grantor to collect and use the
Rents, and to exercise the rights assigned in this
paragraph, in any way that is consistent with its
obligations under the Loan Documents, under its terms.
This license, however, expires upon the maturity of the
Loan by acceleration or by lapse of time. Beneficiary
may terminate the license by written notice upon either
(i) Default or (ii) the occupancy of more than one-half
of the leasable space in the Improvements by a single
tenant that is the subject of a petition under the
Bankruptcy Code, that has threatened to file such a
petition, or whose insolvency is imminent. If the
license to collect rents is terminated under clause
(ii) and there is no Default, then Beneficiary shall
collect the Rent directly, apply it to that portion of
the Indebtedness then due and payable, and promptly
remit any excess amount to Grantor. Grantor shall
promptly remit to Beneficiary any Rents it receives
after the expiration or termination of Grantor's
license to collect the Rents.
16. ACCELERATION
Under the terms of the Notes, if a Default exists,
Beneficiary may, at its option, without Notice to
Grantor, declare the Indebtedness to be immediately due
and payable.
17. RIGHTS OF ENTRY AND TO OPERATE
17.1 Entry on Property
If a Default exists, Beneficiary may without
notice enter upon the Real Property and
take exclusive possession of the Real
Property and of all books, records and
accounts, all without notice and without
being guilty of trespass. If Grantor
remains in possession of all or any part
of the Property after Default and
without Beneficiary's prior written
consent, Beneficiary may, without notice
to Grantor, invoke any and all legal
remedies to dispossess Grantor.
17.2 Operation of Property
If a Default exists, Beneficiary may hold,
lease, manage, operate or otherwise use
or permit the use of the Real Property,
either itself or by other persons, firms
or entities, in such manner, for such
time and upon such other terms as
Beneficiary may deem to be prudent and
reasonable under the circumstances
(making such repairs, alterations,
additions and improvements thereto and
taking any and all other action with
reference thereto, from time to time, as
Beneficiary deems necessary or
desirable), and apply all Rents and
other amounts collected by Beneficiary
in accordance with the provisions of the
Absolute Assignment of Leases and Rents.
18. RECEIVERSHIP
If a Default exists, Beneficiary may apply to a court of
competent jurisdiction for the appointment of a
receiver of the Property, whether or not the value of
the Property exceeds the Indebtedness, whether or not
waste or deterioration of the Real Property has
occurred, and whether or not other arguments based on
equity would justify the appointment. Grantor
irrevocably consents to such an appointment. Any such
receiver shall have all the rights and powers
customarily given to receivers in California, including
the rights and powers granted to Beneficiary by this
Deed of Trust, the power to maintain, lease and operate
the Real Property on terms approved by the court, and
the power to collect the Rents and apply them to the
Indebtedness or otherwise as the court may direct.
Once appointed, a receiver may at Beneficiary's option
remain in place until the Indebtedness has been paid in
full. Grantor agress that a receiver's bond of not
over $25,000 shall be sufficient, except that
Beneficiary, in its discretion, may require a
receiver's bond in any amount not in excess of
$1,000,000.
19. FORECLOSURE
Upon the existence of Default, Beneficiary may immediately
proceed to foreclose the lien of this Deed of Trust
against all or part of the Real Property by foreclosure
sale in accordance with the laws of California.
19.1 Power-Of-Sale Foreclosure
Upon Default, either concurrently with, or
independently of, exercise of
Beneficiary's right to foreclose
judicially, Beneficiary may elect to
cause all or any part of the Property to
be sold at a private foreclosure sale as
follows:
(a) Classification of Property
Beneficiary may proceed as if all
of the Property were Real
Property, or may elect to
treat any of the Property
which consists of a right in
action or which is property
that in the opinion of
Beneficiary can be severed
from the Land or Improvements
without causing structural
damage as though the same were
Personal Property, and dispose
of it as Property subject to
the UCC, treating the
remainder of the Property as
Real Property.
(b) Timing of Foreclosure Sale
Beneficiary may cause any such sale
or other disposition to be
conducted immediately
following the expiration of
any cure period specified in
this Deed of Trust, or
immediately upon the
expiration of any redemption
or reinstatement period
required by law, or
Beneficiary may delay any such
sale or other disposition for
such period of time as
Beneficiary deems to be in its
best interest. Should
Beneficiary desire that more
than one such sale or other
disposition be conducted,
Beneficiary may, at its
option, cause it to be
conducted simultaneously or
successively, on the same day
or at such different days or
times and in such order as
Beneficiary may deem to be in
its best interests.
19.2 Property Subject to UCC
Should Beneficiary elect to cause any of the
Property which is subject to the UCC to
be disposed of, Beneficiary may at its
discretion dispose of any part of such
Property in any order or manner
permitted by the UCC, or in accordance
with any other remedy provided by
applicable law, regardless of whether
such Property is located on or about the
Real Property. Any such disposition may
be conducted by an employee or agent of
Beneficiary or Trustee. Grantor and
Beneficiary shall be eligible to
purchase any part or all of such
property at any such disposition, which
may be either public or private as
Beneficiary may elect. Beneficiary
shall also have the rights and remedies
of a secured party under the UCC, or
otherwise available at law or in equity.
Under the power of sale granted by this
Section, Beneficiary may, in its
discretion and without regard to the
adequacy of its security, elect to
proceed against any or all of the Real
Property, Personal Property and Fixtures
in any manner permitted under Section
9501(4)(a) of the UCC; and if
Beneficiary elects to proceed in the
manner permitted under Section
9501(4)(a)(ii) of the UCC, the power of
sale shall be exercisable with respect
to all or any of the Real Property,
Personal Property and Fixtures covered
hereby, as designated by Beneficiary,
and the Trustee is hereby authorized and
empowered to conduct any such sale of
any Real Property, Personal Property and
Fixtures in accordance with the
procedures applicable to Real Property.
Where the Property consists of Real Property
and Personal Property, any reinstatement
of the obligation secured by this Deed
of Trust and Security Agreement
following default and an election by
Beneficiary to accelerate the maturity
of said obligation, which reinstatement
is made by Grantor or any other person
or entity permitted to exercise the
right of reinstatement under Section
2924c of the California Civil Code or
any successor statute, shall, in
accordance with the terms of California
Commercial Code Section 9501(4)(c)(iii),
not prohibit Beneficiary from conducting
a sale or other disposition of any
Personal Property or Fixtures or from
otherwise proceeding against or
continuing to proceed against any
Personal Property or Fixtures in any
manner permitted by the UCC; nor shall
any such reinstatement invalidate,
rescind or otherwise affect any sale,
disposition or other proceeding held,
conducted or instituted with respect to
any Personal Property or Fixtures prior
to such reinstatement or pending at the
time of such reinstatement. Any sums
paid to Beneficiary in effecting any
reinstatement pursuant to Section 2924c
of the California Civil Code shall be
applied to the secured obligation and to
Beneficiary's and Trustee's reasonable
costs and expenses in the manner
required by Section 2924c.
Expenses of retaking, holding, preparing for
sale, selling or the like shall be borne
by Grantor and shall include
Beneficiary's and Trustee's attorneys'
fees, costs and expenses, and shall not
be limited to amounts provided as
recoverable by statute. Grantor, upon
demand of Beneficiary, shall assemble
such Property and make it available to
Beneficiary at the Premises, a place
which Beneficiary and Grantor deem to be
reasonable. Beneficiary shall give
Grantor at least five (5) days' prior
written Notice of the time and place of
any public sale or other disposition of
such Property or of the time of or after
which any private sale or other intended
disposition is to be made, and if such
Notice is sent to Grantor, Grantor
acknowledges that it will constitute
reasonable notice to Grantor.
19.3 Real Property
Should Beneficiary elect to sell all or part
of the Real Property, Beneficiary or
Trustee shall give such notice of
default and election to sell as may then
be required by applicable law.
Thereafter, upon the expiration of such
time and the giving of such notice, and
without the necessity of any demand on
Grantor, Trustee, at the time and place
specified in the notice of sale, shall
sell the Property or any portion thereof
specified by Beneficiary, at public
auction to the highest bidder for cash
in lawful money of the United States,
payable at time of sale. Trustee may,
and upon request of Beneficiary shall,
from time to time, postpone any such
sale by public announcement at the time
and place noticed or fixed by the
previous postponement. If the Property
consists of several lots or parcels,
Beneficiary may designate the order in
which such lots or parcels shall be
offered for sale or sold. Grantor
expressly waives its right to direct the
order of sale.
19.4 Trustee's Instrument of Conveyance
Upon the completion of any sale made by
Trustee or Beneficiary under this
Section, Trustee or Beneficiary, as
applicable, or any officer of any court
empowered to do so shall execute and
deliver to the accepted purchaser good
and sufficient instruments conveying,
assigning and transferring all estate,
right, title and interest in and to the
property and rights sold, but without
any covenant or warranty whatsoever,
express or implied, whereupon such
purchaser shall be let into immediate
possession. With respect to any sale
made under or by virtue of this Section,
Trustee is hereby irrevocably appointed
the true and lawful attorney of Grantor
in its name and stead, with full power
of substitution, to make all necessary
conveyances, assignments, transfers and
deliveries of the Property or any part
thereof so sold and the rights so sold,
and for that purpose Trustee may execute
all necessary instruments of conveyance,
assignment and transfer, and may
substitute one or more persons with like
power, Grantor hereby ratifying and
confirming all that its said attorney or
any substitute or substitutes shall
lawfully do by virtue thereof.
Nevertheless, Grantor, if so requested
by Trustee or Beneficiary, shall ratify
and confirm any such sale by executing
and delivering to Trustee or to such
purchaser all such instruments as may be
advisable, in the judgment of Trustee or
Beneficiary, for the purpose as may be
designated in such request. Any sale
made under or by virtue of this Section
shall operate to divest all of the
estate, right, title, interest, claim
and demand whatsoever, whether at law or
in equity, of Grantor in and to the
properties and rights so sold, and shall
be a perpetual bar, both at law and in
equity against Grantor and any and all
persons claiming or who may claim the
same, or any part thereof, from, through
or under Grantor.
The recitals in any such deed or instrument
of conveyance of any matters or facts,
including those of default and notice of
sale, demand that such sale should be
made, postponement of sale, terms of
sale, sale, purchase, payment of
purchase money and other facts affecting
the regularity or validity of such sale
or disposition, shall be conclusive
proof of the truth of such facts; and
any such deed or instrument of
conveyance shall be conclusive against
all persons as to such facts.
19.5 Rights of Purchaser
The acknowledgment of the receipt of the
purchase money contained in any deed or
instrument of conveyance shall be
sufficient to discharge the grantee from
all obligations to see to the proper
application of the consideration given.
The purchaser at any such sale may
disaffirm any easement granted or rental
or lease contract made in violation of
any provision of this Deed of Trust, and
may take immediate possession of the
Property free from, and despite the
terms of, such grant of easement and
rental or lease contract.
19.6 Conduct of Sales
If the Property consists of several lots,
parcels or items of property,
Beneficiary may, in its discretion: (I)
designate the order in which such lots,
parcels or items shall be offered for
sale or sold, or (ii) elect to sell such
lots, parcels or items through a single
sale, or through two or more successive
sales, or in any other manner
Beneficiary deems in its best interest.
Should Beneficiary desire that more than
one sale or other disposition of the
Property be conducted, Beneficiary may,
at its option, cause the sales to be
conducted simultaneously, or
successively, on the same day, or at
such different days or times and in such
order as Beneficiary may deem to be in
its best interests, and no such sale
shall terminate or otherwise affect the
lien of this Deed of Trust on any unsold
part of the Property until the
Indebtedness has been fully paid. In
the event Beneficiary elects to dispose
of the Property through more than one
sale Grantor agrees to pay the costs and
expenses of each such sale and of any
judicial proceedings where in the same
may be made, including reasonable
compensation to Trustee and Beneficiary,
their agents and counsel, and to pay all
expenses, liabilities and advances made
or incurred by Trustee with such sale or
sales, together with interest on all
such advances made by Trustee at the
Default Rate. Any person, including
Grantor, Trustee or Beneficiary, may
purchase at any sale, and Beneficiary
shall have the right to purchase at any
sale by crediting upon the bid price the
amount of all or any part of the
Indebtedness, as specified below.
Beneficiary, upon any such purchase,
shall acquire good title to the
properties so purchased, free of the
lien of this Deed of Trust and free of
all rights of redemption in Grantor and
free of all liens and encumbrances
subordinate to this Deed of Trust. Upon
any sale, Trustee shall execute and
deliver to the purchaser or purchasers a
deed or deeds conveying the property so
sold, but without any covenant or
warranty whatsoever, express or implied,
whereupon such purchaser or purchasers
shall be let into immediate possession;
and the recitals in any such deed or
deeds of fact, such as default, the
giving of notice of default and notice
of sale, and other facts affecting the
regularity or validity of such sale or
disposition, shall be conclusive proof
of the truth of such facts and any such
deed or deeds shall be conclusive
against all persons as to such facts.
19.7 State Law Controls
Nothing in this Deed of Trust dealing with
foreclosure procedures or specifying
particular actions to be taken by
Beneficiary or by Trustee or any similar
officer in connection with a foreclosure
sale shall be deemed to contradict or
add to the requirements and procedures
now or hereafter specified by California
law, and any such inconsistency shall be
resolved in favor of California law
applicable at the time of foreclosure.
19.8 Covenant of Faithful Performance; Waiver of Statutory Fees
Trustee covenants faithfully to perform and
fulfill the trusts created by this Deed
of Trust; and, to the extent permissible
by law, waives any statutory fee and
agrees to accept instead reasonable
compensation for any services rendered.
19.9 Beneficiary's Bid at Foreclosure Sale
Upon any sale made under this Section,
whether made under the power of sale or
by virtue of judicial proceedings or of
a judgment or decree of foreclosure and
sale, Beneficiary may bid for and
acquire the all or part of the Property
and, in lieu of paying cash, may make
settlement for the purchase price by
crediting upon the indebtedness or other
sums secured by this Deed of Trust the
net sales price after deducting the
expenses of sale and the costs of the
action and any other sums which Trustee
or Beneficiary is authorized to deduct
under this Deed of Trust. If it does
so, this Deed of Trust, the Notes and
other documents evidencing the
Indebtedness shall be presented to the
person or persons conducting the sale so
that the amount so used or applied may
be credited to the Indebtedness.
20. WAIVERS
To the maximum extent permitted by law, Grantor irrevocably
and unconditionally WAIVES and RELEASES any present or
future rights (a) of redemption (b) that may exempt the
Property from any civil process, (c) to appraisal or
valuation of the Property, (d) to extension of time for
payment, (e) that may subject Beneficiary's exercise of
its remedies to the administration of any decedent's
estate or to any partition or liquidation action, (f)
to any homestead exemption and (g) that in any way
would delay or defeat the right of Beneficiary to cause
the sale of the Real Property for the purpose of
satisfying the Indebtedness. Grantor agrees that the
price paid at a lawful foreclosure sale, whether by
Beneficiary or by a third party, and whether paid
through cancellation of all or a portion of the
Indebtedness or in cash, shall conclusively establish
the value of the Real Property.
21. EXCULPATION CLAUSE AND RECOURSE ("CARVEOUT") OBLIGATIONS
Beneficiary agrees that it shall not seek to enforce any
monetary judgment against Grantor except through
recourse to the Property and any other property now or
hereafter securing all or any part of the Indebtedness,
unless the obligation from which the judgment arises is
a Recourse Obligation. Recourse Obligations include
Beneficiary's costs, expenses (including reasonable
attorneys' fees), losses and actual damages caused by
(i) waste, not including ordinary wear and tear, unless
Grantor fails to maintain the Property with ordinary
care; (ii) fraud or written material misrepresentation
by Grantor; (iii) failure to pay taxes, assessments,
ground rent or any other lienable impositions as
required under the Loan Documents; (iv) misapplication
of tenant security deposits, insurance proceeds or
condemnation proceeds, or the unavailability to
Beneficiary of condemnation proceeds because a lease of
the Real Property grants a tenant the right to a
portion of the owner's award (unless that portion is
specifically allocated to the tenant's interest by the
condemning authority); (v) failure while in monetary
default to pay to Beneficiary all rents, income and
profits, net of reasonable and customary operating
expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth
in the Loan Documents; (vii) destruction or removal
from the Real Property of fixtures or personal property
securing the Loan, unless replaced by items of equal
value; (viii) terminating, amending or entering into a
lease of the Real Property in violation of the Loan
Documents; (ix) willful or grossly negligent violation
of applicable law; or (x) collection of the Loan,
including the costs of enforcement of the Loan
Documents after the Notes mature by acceleration or
lapse of time. Grantor may also assume recourse
liability under Loan Documents or other agreements that
expressly provide for such personal liability, and such
Loan Documents or agreements, if any, shall not be
subject to the exculpation from personal liability set
forth in this Paragraph.
In addition, Grantor shall have personal liability for
the entire indebtedness if Grantor (a) voluntarily
transfers or encumbers the Property in violation of the
Loan Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into
Beneficiary's choice of either an agreement to permit
an uncontested foreclosure or an agreement to deliver a
deed in lieu of foreclosure, within sixty days of
Beneficiary's acceptance of the offer. Following
Beneficiary's acceptance of such an offer, default by
Grantor shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on
any payment by Beneficiary, on the release of any
obligor from any recourse obligation, or on any other
concession.
22. SECURITY AGREEMENT AND FIXTURE FILING
22.1 Security Agreement
This Deed of Trust shall be self-operative
and shall constitute a Security
Agreement pursuant to the provisions of
the California Uniform Commercial Code
(the "Code") with respect to those items
comprising Property that may be subject
to a security interest under the Code.
Grantor, as debtor, hereby grants
Beneficiary, as secured party, a
security interest in those items and in
all related additions, replacements,
substitutions and proceeds, for the
purpose of securing the Indebtedness.
Grantor hereby agrees to execute and
deliver on demand, and irrevocably
constitutes and appoints Beneficiary the
attorney-in-fact of Grantor, to execute,
deliver and, if appropriate, to file
with the appropriate filing officer or
office, such security agreements,
financing statements or other
instruments as Beneficiary may require
in order to create, perfect, or continue
this security interest. Grantor shall
pay all related filing fees and costs,
all reasonable costs and expenses of any
record searches (or their
continuations), as Beneficiary may
reasonably require. Without the prior
written consent of Beneficiary, Grantor
shall not create or suffer the creation
of any other lien on or security
interest in any of the Property subject
to the security interest. Upon Default,
Beneficiary shall have the rights and
remedies of a secured party under the
Code as well as all other rights and
remedies available at law or in equity,
and, at Beneficiary's option,
Beneficiary may also invoke the remedies
provided elsewhere in this Deed of Trust
as to such property. Grantor and
Beneficiary agree that the rights
granted to Beneficiary as secured party
under this Section 21 are in addition to
rather than a limitation on any of
Beneficiary's other rights under this
Deed of Trust with respect to the
Personal Property. No failure to
mention any item in a financing
statement shall limit the scope of
Grantor's assignment of any Property,
impair the priority of Beneficiary`s
lien on any Personal Property, or alter
Beneficiary's rights to Insurance
Proceeds and Condemnation Proceeds,
except to the extent that a court holds
that mention of the item in the Code
records was required in order for
Beneficiary's interest to enjoy priority
over the interests of third parties.
22.2 Fixture Filing
This Deed of Trust constitutes a financing
statement filed as a fixture filing in
the Official Records of the County
Recorder of Los Angeles County,
California with respect to any and all
fixtures comprising Property. The
"debtor" is AIP Properties #3, L.P., a
limited partnership organized under
Delaware law, the "secured party" is
Life Investors Insurance Company of
America, a corporation organized under
the laws of Iowa, the collateral is as
described in Section 22.1 above and the
granting clauses in this Deed of Trust,
and the addresses of the debtor and
secured party are the addresses stated
in Subsection 25.11 of this Deed of
Trust for notices to such parties.
23. ENVIRONMENTAL MATTERS
23.1 Representations
Grantor represents as follows:
(a) No Hazardous Substances
To the best of Grantor's knowledge
following due inquiry as a
duly diligent property owner,
and except as disclosed in the
ESA, the Real Property has
been, and is, free of
contamination from Hazardous
Substances, and no Hazardous
Substances have been released
on or about the Real Property.
(b) Compliance with Environmental Laws
The Real Property and its current
use and presently contemplated
uses comply with all
Environmental Laws and, in
connection with the ownership,
operation and use of the Real
Property, all necessary
permits, licenses,
authorizations, and other
consents and approvals have
been obtained, and all
necessary notices,
publications, and filings have
been made and given, with
respect to the storage, use,
and disposal of any Hazardous
Substances in, on, or about
the Real Property.
(c) No Actions or Proceedings
There is no present or, to the best
of Grantor's knowledge
following due inquiry as a
duly diligent property owner,
no past or threatened action,
proceeding or investigation by
any governmental authority or
agency related to any
suspected or actual violation
of any Environmental Law with
respect to, or the presence of
any Hazardous Material on, the
Real Property.
23.2 Covenants
Grantor covenants as follows:
(a) Compliance with Environmental Laws
Grantor shall, and Grantor shall
cause all employees, agents,
contractors, and tenants of
Grantor and any other persons
present on or occupying the
Real Property, to keep and
maintain the Real Property in
compliance with all
Environmental Laws.
(b) Notices, Actions and Claims
Grantor shall immediately advise
Beneficiary in writing of (i)
any notices from any
governmental or quasi-
governmental agency or
authority of violation or
potential violation of any
Environmental Law received by
Grantor, (ii) any and all
enforcement, cleanup, removal
or other governmental or
regulatory actions instituted,
completed or threatened
pursuant to any Environmental
Law, (iii) all claims made or
threatened by any third party
against Grantor or the Real
Property relating to damage,
contribution, cost recovery,
compensation, loss or injury
resulting from any Hazardous
Substances, and (iv) discovery
by Grantor of any occurrence
or condition on any real
property adjoining or in the
vicinity of the Real Property
that could cause the Real
Property to become
contaminated by or with
Hazardous Substances.
23.3 Beneficiary's Right to Control Claims
Beneficiary shall have the right (but not the
obligation) to join and participate in,
as a party if it so elects, any legal
proceedings or actions initiated in
connection with any Hazardous Substances
and to have its related and reasonable
attorneys' and consultants' fees paid by
Grantor upon demand.
23.4 Indemnification
Grantor shall be solely responsible for, and
shall indemnify, defend, and hold
harmless Beneficiary, Trustees, and
their respective directors, officers,
employees, agents, successors and
assigns from and against, any loss,
damage, cost, expense or liability of
whatever kind or nature, known or
unknown, contingent or otherwise,
directly or indirectly arising out of or
attributable to the use, generation,
storage, release, threatened release,
discharge, disposal, or presence
(whether prior to or after the date of
this Deed of Trust) of Hazardous
Substances on, in, under or about the
Real Property (whether by Grantor, a
predecessor in title, any tenant, or any
employees, agents, contractor or
subcontractors of any of the foregoing
or any third persons at any time
occupying or present on the Real
Property), including, without
limitation: (i) personal injury; (ii)
death; (iii) damage to property; (iv)
all consequential damages; (v) the cost
of any required or necessary repair,
cleanup or detoxification of the Real
Property, including the soil and ground
water thereof, and the preparation and
implementation of any closure, remedial
or other required plans; (vi) damage to
any natural resources; and (vii) all
reasonable costs and expenses incurred
by Beneficiary or Trustee in connection
with clauses (i) through (vi), including
but not limited to reasonable attorneys'
and consultants' fees; provided,
however, that nothing contained in this
Section shall be deemed to preclude
Grantor from seeking indemnification
from, or otherwise proceeding against,
any third party including, without
limitation, any tenant or predecessor in
title to the Real Property. The
covenants, agreements, and indemnities
set forth in this Section shall be
binding upon Grantor and its heirs,
successors and assigns, and shall
survive repayment of the Indebtedness,
foreclosure of the Security, and
Grantor's granting of a deed in lieu of
foreclosure of the Security. Any costs
or expenses incurred by Beneficiary or
Trustee for which Grantor is responsible
or for which Grantor has indemnified
Beneficiary shall be paid to Beneficiary
on demand, with interest at the Default
Rate from the date incurred by
Beneficiary until paid in full, and
shall be secured by this Deed of Trust.
Without the prior written consent of
Beneficiary, Grantor shall not enter
into any settlement agreement, consent
decree, or other compromise in respect
to any claims relating to Hazardous
Substances.
23.5 Environmental Audits
At such times as Beneficiary reasonably
determines that an environmental audit
of the Real Property for the presence of
Hazardous Substances is necessary in
order to determine whether the value of
the Real Property has been or may in the
future be impaired by the presence of
Hazardous Substances on, about or under
the Real Property (but no more often
than annually unless Beneficiary has
reason to believe that Hazardous
Substances may be present), Grantor
shall retain, upon request of
Beneficiary, or Beneficiary may retain
directly, at the sole cost and expense
of Grantor, a licensed geologist,
industrial hygienist or an environmental
consultant (the "Environmental
Consultant") acceptable to Beneficiary
to conduct an environmental audit of the
Real Property. Grantor shall afford any
person conducting an environmental audit
access to the Real Property and all
materials reasonably requested in
connection with the environmental audit.
In light of the possible passage of
title to Beneficiary as a result of
Default, any requirement of an
environmental audit by Beneficiary shall
be deemed reasonable if a Default
exists. Such a requirement shall also
be deemed reasonable if Beneficiary has
received notice of the likely existence
of Hazardous Substances on, about or
under the Real Property. Grantor shall
pay the actual and reasonable cost and
expenses of any environmental audit
obtained by Beneficiary within five days
of written demand. Grantor shall at
Beneficiary's request comply, at its
sole cost and expense in the most
commercially reasonable manner
determined by Grantor, with all
recommendations contained in the
environmental audit required to bring
the Real Property into compliance with
all Environmental Laws, or for
additional testing and studies to
further determine the location, quantity
and types of Hazardous Substances
detected by an environmental audit.
24. CONCERNING THE TRUSTEE
24.1 No Liability
Trustee will not be liable for any error of
judgment or act, or be otherwise
responsible or accountable under any
circumstances. If the Trustee or anyone
acting by virtue of Trustee's powers
enters the Real Property, the Trustee
will not be personally liable for debts
contracted or for liability or damages
incurred in the management or operation
of the Real Property. Trustee will have
the right to rely on any instrument,
document or signature authorizing or
supporting any action taken or proposed
to be taken by Trustee or believed by
Trustee in good faith to be genuine.
Trustee will be entitled to
reimbursement for expenses incurred by
Trustee in the performance of Trustee's
duties and to reasonable compensation
for services rendered. Grantor shall,
from time to time, pay compensation due
Trustee under this Deed of Trust and
reimburse Trustee for and save and hold
Trustee harmless from and against any
and all loss, cost, liability, damage
and expense whatsoever incurred by
Trustee in the performance of Trustee's
duties.
24.2 Retention of Money
All money received by Trustee must, until
used or applied, be held in trust for
the purposes for which it was received,
but need not be segregated in any manner
from any other money (except to the
extent required by law) and Trustee will
have no liability for interest on any
money received.
24.3 Successor Trustees
Trustee may resign by giving of notice of
such resignation in writing to
Beneficiary. If Trustee resigns or
becomes disqualified from acting in the
execution of this Trust or fails or
refuses to exercise the same when
requested by Beneficiary so to do or if
for any reason and without cause
Beneficiary prefers to appoint a
substitute trustee to act instead of the
original Trustee, or any prior successor
or substitute trustee, Beneficiary will
have full power to appoint a substitute
trustee and, if preferred, several
substitute trustees in succession who
shall succeed to all the estates,
rights, powers and duties of the
Trustee.
24.4 Succession Instruments
Any new Trustee appointed will, without any
further act, deed or conveyance, become
vested with all the estates, properties,
rights, powers and trusts of Trustee's
predecessor. Upon the written request
of Beneficiary or of any successor
trustee, Trustee ceasing to act shall
execute and deliver an instrument
transferring to such successor trustee
all the estates, properties, rights,
powers and trusts of Trustee so ceasing
to act, and shall duly assign, transfer
and deliver any of the property and
money held by Trustee to the successor
trustee so appointed in Trustee's place.
24.5 Performance of Duties by Agents
Trustee may authorize one or more parties to
act on Trustee's behalf to perform
Trustee's ministerial functions,
including, without limitation, the
transmittal and posting of any notices.
25. MISCELLANEOUS
25.1 Survival of Obligations
Each and all of the Obligations shall survive
the execution and delivery of the Loan
Documents and will continue in full
force and effect until the Indebtedness
and the Obligations have been paid and
satisfied in full.
25.2 Further Assurances
Grantor, upon the request of Beneficiary or
Trustee, shall complete, execute,
acknowledge, deliver and record or file
such further instruments and do such
further acts as may be necessary,
desirable or proper to carry out more
effectively the purposes of this Deed of
Trust, to subject any property intended
to be covered by this Deed of Trust to
the liens and security interests it
creates, to place third parties on
notice of those liens and security
interests, or to correct any defects
which may be found in any Loan Document.
Grantor irrevocably appoints Beneficiary
as its agent to complete, execute,
deliver and record or file all such
instruments.
25.3 Recording and Filing
Grantor shall cause this Deed of Trust and
all amendments, supplements, and
substitutions to be recorded, filed, re-
recorded and refiled in such manner and
in such places as Beneficiary may
reasonably request. Grantor and will
pay all recording filing, re-recording
and refiling taxes, fees and other
charges.
25.4 No Waiver
No deliberate or unintentional failure by
Beneficiary to require strict
performance by Grantor of any Obligation
shall be deemed a waiver, and
Beneficiary shall have the right at any
time to require strict performance by
Grantor of any Obligation.
25.5 Expenses
Grantor shall pay all filing and recording
fees, and all expenses incident to the
execution and acknowledgment of this
Deed of Trust, any supplements or
amendments, and any instrument entered
into under Subsection 25.2. Grantor
shall pay or reimburse Beneficiary, upon
demand, for all costs and expenses,
including appraisal and reappraisal
costs of the Property and reasonable
attorneys' and legal assistants' fees,
which Beneficiary may incur in
connection with enforcement proceedings
hereunder, and reasonable attorneys' and
legal assistants' fees incurred by
Beneficiary in any other suit, action,
legal proceeding or dispute of any kind
in which Beneficiary is made a party or
appears as party plaintiff or defendant,
affecting the Indebtedness, this Deed of
Trust, or the Property, or required to
protect or sustain the lien of this Deed
of Trust. Grantor shall be obligated to
pay (or to reimburse Beneficiary) for
such fees, costs and expenses and shall
indemnify and hold Beneficiary and
Trustee harmless from and against any
and all loss, cost, expense, liability,
damage and claims and causes of action,
including reasonable attorneys' fees,
incurred or accruing by reason of
Grantor's failure to promptly repay any
such fees, costs and expenses.
25.6 Covenants Running with the Land
All Obligations are intended by the parties
to be and shall be construed as
covenants running with the Land.
25.7 Successors and Assigns
All of the terms of the Loan Documents shall
apply to, be binding upon and inure to
the benefit of the successors and
assigns of the parties.
25.8 Severability
The Loan Documents are intended to be
performed in accordance with, and only
to the extent permitted by, all
applicable Legal Requirements. Any
provision of the Loan Documents that is
prohibited or unenforceable in any
jurisdiction shall nevertheless be
construed and given effect to the extent
possible. The invalidity or
unenforceability of any provision in a
particular jurisdiction shall neither
invalidate nor render unenforceable any
other provision of the Loan Document in
that jurisdiction, and shall not affect
the validity or enforceability of that
provision in any other jurisdiction. If
a provision is held to be invalid or
unenforceable as to a particular person
or under a particular circumstance, it
shall nevertheless be presumed valid and
enforceable as to others, or under other
circumstances.
25.9 Usury
The parties intend that no provision of the
Notes or the Loan Documents be
interpreted, construed, applied, or
enforced so as to permit or require the
payment or collection of interest in
excess of the highest rate of interest
(the "Maximum Permitted Rate") permitted
to be paid or collected by applicable
law with respect to this transaction.
In this regard, Grantor and Beneficiary
each stipulate and agree that it is
their common and overriding intent to
contract in strict compliance with
applicable usury laws. Accordingly,
none of the terms of this Deed of Trust,
the Notes or any of the other Loan
Documents shall ever be construed to
create a contract to pay, as
consideration for the use, forbearance
or detention of money, interest at a
rate in excess of the Maximum Permitted
Rate. Grantor shall never be liable for
interest in excess of the Maximum
Permitted Rate. Therefore, (a) in the
event that the Indebtedness and
Obligations are prepaid or the maturity
of the Indebtedness and Obligations is
accelerated by reason of an election by
Beneficiary, unearned interest shall be
canceled and, if theretofore paid, shall
either be refunded to Grantor or
credited on the Indebtedness evidenced
by the Notes, as Beneficiary may elect;
(b) the aggregate of all interest and
other charges constituting interest
under applicable laws and contracted
for, chargeable or receivable under the
Notes and the other Loan Documents or
otherwise in connection with the
transaction contemplated thereby shall
never exceed the maximum amount of
interest, nor produce a rate in excess
of the Maximum Permitted Rate and (c) if
any excess interest is provided for, it
shall be deemed a mistake, and the same
shall, at the option of the holder of
the Notes, either be refunded to Grantor
or credited on the unpaid principal
amount (if any), and the Indebtedness
evidenced by the Notes shall be
automatically reformed so as to permit
only the collection of the interest at
the Maximum Permitted Rate.
Furthermore, if any provision of the
Notes or any of the other Loan Documents
is interpreted, construed, applied, or
enforced, in such a manner as to provide
for interest in excess of the Maximum
Permitted Rate, then the parties intend
that such provision automatically shall
be deemed reformed nunc pro tunc so as
to require payment only of interest at
the Maximum Permitted Rate. If, for any
reason whatsoever, interest paid or
received during the full term of the
applicable indebtedness produces a rate
which exceeds the Maximum Permitted
Rate, then the amount of such excess
shall be deemed credited nunc pro tunc
in reduction of the then outstanding
principal amount of the Indebtedness,
together with interest at such Maximum
Permitted Rate. Beneficiary shall
credit against the principal of such
Indebtedness (or, if such Indebtedness
shall have been paid in full, shall
refund to the payor of such interest)
such portion of said interest as shall
be necessary to cause the interest paid
to produce a rate equal to the Maximum
Permitted Rate. All sums paid or agreed
to be paid to Beneficiary for the use,
forbearance or detention of money shall,
to the extent permitted by applicable
law, be amortized, prorated, allocated
and spread in equal parts throughout the
full term of the applicable
indebtedness, so that the interest rate
is uniform throughout the full term of
such indebtedness. In connection with
all calculations to determine the
Maximum Permitted Rate, the parties
intend that all charges be excluded to
the extent they are properly excludable
under applicable usury laws, as they
from time to time are determined to
apply to this transaction. The
provisions of this Section shall control
all agreements, whether now or hereafter
existing and whether written or oral,
between Grantor and Beneficiary.
25.10 Entire Agreement.
The Loan Documents contain the entire
agreements between the parties relating
to the financing of the Real Property,
and all prior agreements which are not
contained in the Loan Documents, other
than the Environmental Indemnity
Agreements, are terminated. The Loan
Documents represent the final agreement
between the parties and may not be
contradicted by evidence of prior,
contemporaneous, or subsequent oral
agreements of the parties. There are no
unwritten oral agreements between the
parties.
The Loan Documents may be amended, revised,
waived, discharged, released or
terminated only by a written instrument
or instruments executed by the party
against which enforcement of the
amendment, revision, waiver, discharge,
release or termination is asserted. Any
alleged amendment, revision, waiver,
discharge, release or termination that
is not so documented shall be null and
void.
25.11 Notices.
All notices demands, consents, approvals and
other communications given pursuant to
this Deed of Trust must be in writing
and must be sent by hand, or by telecopy
(with a duplicate copy sent by ordinary
mail, postage prepaid), or by postage
prepaid, certified or registered mail,
return receipt requested, or by
reputable overnight courier service,
postage prepaid, addressed to the party
to be notified as set forth below:
if to Beneficiary:
Life Investors Insurance Company of
America
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5223
Attn. Mortgage Loan Department
Telecopy Number: (319) 369-2188
if to Grantor:
AIP Properties #3, L.P.
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
Attn: David B. Warner
Telecopy Number: (972) 550-6037
Notices will be deemed given when delivered
to Beneficiary or to Grantor, as
applicable (regardless of whether
delivered to the persons stated above to
receive copies), by hand or when a
legible copy is received by telecopier
(provided receipt is verified by
telephone confirmation or one of the
other permitted means of giving Notices
under this Subsection), or if mailed,
three (3) days after mailing (or on the
date of delivery for overnight courier
service), with failure to accept
delivery constituting delivery for this
purpose. The parties agree to use
reasonable efforts to provide the copies
of Notices required above, but delivery
of such copies shall not be required for
effective delivery of Notice. Actual
notice, however and from whomever given
or received, will always be effective
Notice when received. Beneficiary may
change its address for Notices set forth
above by giving at least ten (10) days'
prior Notice of such change in writing
to Grantor. Grantor may change the
addresses for Notices set forth above by
giving at least thirty (30) days' prior
Notice of such change in writing to
Beneficiary.
25.12 Counterparts.
This Deed of Trust may be executed in any
number of counterparts, each of which
shall be an original, but all of which
together shall constitute but one
instrument.
25.13 Applicable Law.
This Deed of Trust will be interpreted,
construed, applied, and enforced
according to, and will be governed by,
the laws of the State of California,
without regard to any choice of law
principles which, but for this
provision, would require the application
of the law of another jurisdiction and
regardless of where executed or
delivered, where payable or paid, where
any cause of action accrues in
connection with this transaction, where
any action or other proceeding involving
this Deed of Trust is instituted or
pending, or whether the laws of the
State of California otherwise would
apply the laws of another jurisdiction.
25.14 Headings and General Application.
The section, subsection, and paragraph
headings of this Deed of Trust are
provided for convenience of reference
only and shall in no way affect, modify
or define, or be used in construing, the
text of the sections , subsections or
paragraphs. If the text requires, words
used in the singular shall be read as
including the plural, and pronouns of
any gender shall include all genders.
25.15 Sole Benefit.
This Deed of Trust and the other Loan
Documents have been executed for the
sole benefit of Grantor and Beneficiary
and the successors and assigns of
Beneficiary. No other party shall have
rights thereunder or be entitled to
assume that the parties thereto will
insist upon strict performance of their
mutual obligations hereunder, any of
which may be waived from time to time.
Grantor shall have no right to assign
any of its rights under the Loan
Documents to any party whatsoever.
25.16 Subrogation.
If any or all of the proceeds of the
Indebtedness or Obligations have been
used to extinguish, extend or renew any
indebtedness heretofore existing against
the Property or to satisfy any
indebtedness or obligation secured by a
lien or encumbrance of any kind
(including liens securing the payment of
any Impositions), such proceeds have
been advanced by Beneficiary at
Grantor's request, and to the extent of
such funds so used, the Indebtedness and
Obligations in this Deed of Trust shall
be subrogated to and extend to all of
the rights, claims, liens, titles and
interests heretofore existing against
the Property pursuant thereto to secure
the indebtedness or obligation so
extinguished, paid, extended or renewed,
and the rights, claims, liens, titles
and interests of Beneficiary pursuant
thereto, shall not be waived but rather
shall be continued in full force and
effect and in favor of Beneficiary and
shall be merged with the lien and
security interest created herein as
cumulative security for the repayment of
the Indebtedness and satisfaction of the
Obligations.
25.17 Release of Claims.
Grantor hereby RELEASES, DISCHARGES and
ACQUITS forever Beneficiary and Trustee
and their officers, directors, trustees,
agents, employees and counsel (in each
case, past, present or future) from any
and all Claims existing as of the date
hereof (or the date of actual execution
hereof by Grantor, if later). As used
herein, the term "Claim" shall mean any
and all liabilities, claims, defenses,
demands, actions, causes of action,
judgments, deficiencies, interest,
liens, costs or expenses (including
court costs, penalties, attorneys' fees
and disbursements, and amounts paid in
settlement) of any kind and character
whatsoever, including claims for usury,
breach of contract, breach of
commitment, negligent misrepresentation
or failure to act in good faith, in each
case whether now known or unknown,
suspected or unsuspected, asserted or
unasserted or primary or contingent, and
whether arising out of written
documents, unwritten undertakings,
course of conduct, tort, violations of
laws or regulations or otherwise.
25.18 No Partnership.
Nothing contained in the Loan Documents is
intended to create any partnership,
joint venture or association between
Grantor and Beneficiary, or in any way
make Beneficiary a co-principal with
Grantor with reference to the Property.
25.19 Payoff Procedures
If Grantor pays or causes to be paid to
Beneficiary all of the Indebtedness,
then the Trustee's interest in the Real
Property shall cease, and upon receipt
by Beneficiary of such payment,
Beneficiary shall either (a) assign the
Loan Documents and endorse the Notes (in
either case without recourse or warranty
of
any kind) to a takeout lender, upon payment
of an administrative fee of $750, or (b)
release this Deed of Trust.
IN WITNESS WHEREOF, Grantor has executed and delivered this
Deed of Trust as of the date first set forth above.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3 GP,
Inc.,
a Texas corporation,
its General Partner
By
_____________________
David B. Warner
Vice President
STATE OF )
) SS.
COUNTY OF )
This instrument was acknowledged before me on the _____
day of November, 1996 by _________________, ____________________
of AIP Properties #3 GP, Inc., a corporation organized under the
laws of Texas, on behalf of said corporation as the General
Partner of AIP Properties #3, L.P., a limited partnership
organized under the laws of Delaware, on behalf of said limited
partnership.
____________________________________
Notary
Public
My commission expires: ___________
My Commission Expires:
(NOTARIAL SEAL)
EXHIBIT A
EXHIBIT B
American Industrial Portfolio
Huntington Drive
Los Angeles County, California
AEGON Loan No. 87488
$4,575,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $4,575,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one hundredths percent (8.61%)
per annum (the "Note Rate"). Interest shall be calculated
on the basis of a 360-day year and computed each month in
arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$38,684.81. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower recognizes that any Default (as defined in Section
8 below) in the timely payment of any installment of
principal or interest due hereunder will result in loss and
additional expenses to Lender in servicing the debt
evidenced hereby, handling such delinquent payments and
meeting Lender's other financial obligations, the extent of
which loss and additional expenses is extremely difficult
and impractical to ascertain. Borrower therefore agrees
that in the event any installment of principal or interest
due hereunder is not paid within ten (10) days after the
date the same becomes due, a late charge of five percent
(5%) of the amount of such late payment is a reasonable
estimate of such loss and expenses and may, without prior
notice to Borrower, be charged by Lender for the purposes of
defraying such loss and expense, unless applicable law
requires a lesser such charge, in which event the maximum
rate permitted by such law may be charged by Lender for said
purposes. Late charges due to Lender from time to time
hereunder shall be payable on or before the tenth (10th) day
of the calendar month immediately following the calendar
month during which a written request for payment is made to
Borrower), and Borrower's failure to pay such sums on or
before such date shall constitute a Default under this Note.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3 GP,
Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., a Delaware limited partnership, to
the trustee named therein for the benefit of Lender, and
conveying the property located in Baltimore, Anne Arundel County,
Maryland, described therein pertaining to an aggregate
$27,990,000 loan made by Life Investors Insurance Company of
America. This Note and the Deed of Trust and Security Agreement
securing the same were executed in my presence.
____________________________
Notary Public
[SEAL]
AFTER RECORDING PLEASE RETURN TO:
Richard L. Reppert, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
THIS PROPERTY IS ONE OF SEVERAL PROPERTIES SECURING A LOAN
DESCRIBED IN THE LOAN AGREEMENT DESCRIBED HEREIN, AND FOR
PURPOSES OF SECTION 12-105(a) OF THE TAX-PROPERTY ARTICLE OF THE
CODE OF MARYLAND AND CALCULATION OF RECORDATION TAX, THE PRO RATA
AMOUNT OF THE TOTAL DEBT AS EVIDENCED BY THE NOTE WHICH IS
PROPERLY ALLOCABLE TO THIS PROPERTY IS $3,112,500.
THE AGGREGATE PRINCIPAL AMOUNT TO BE SECURED BY THIS INSTRUMENT
AT ANY ONE TIME IS $27,990,000.
Deed of Trust and Security Agreement
AIP PROPERTIES #3, L.P., a Delaware limited partnership,
Grantor, having an office at
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
to
Richard L. Reppert, Trustee,
for the benefit of
Life Investors Insurance Company of America, an Iowa corporation,
Beneficiary, having an office
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Loan Amount: $27,990,000
Premises: Parcel E, Block A, Patapsco Industrial Resubdivision,
Anne Arundel County,
Loan Number 87489
Patapsco Industrial Center
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
This Deed of Trust and Security Agreement is made and given this
___ day of November, 1996 by AIP Properties #3, L.P., a limited
partnership organized under the laws of Delaware, having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Grantor"), to Richard L. Reppert, as Trustee, whose
mailing address is c/o Jones, Day, Reavis & Pogue, Metropolitan
Square, 1450 G Street, N.W., Washington, D.C. 20005-2088
("Trustee"), for the benefit of Life Investors Insurance Company
of America, a corporation organized under the laws of Iowa,
having an office c/o AEGON USA Realty Advisors, Inc., 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499-5223
("Beneficiary"). The definitions of capitalized terms used in
this Deed of Trust may be found either in Section 3 below, or
through the cross-references provided in that Section.
1. RECITALS
Under the terms of a commercial mortgage Revised Mortgage
Loan Application and Commitment dated July 18, 1996 (the
"Commitment"), AEGON USA Realty Advisors, Inc. ("AEGON"), as
agent for Beneficiary, agreed to fund a loan in an original
principal amount to be determined in accordance with
procedures described in the Commitment (the "Loan").
Beneficiary has funded the Loan in the principal amount of
$27,990,000 in accordance with the Commitment, and to
evidence the Loan Grantor has executed and delivered to
Beneficiary ten promissory notes in the aggregate amount of
$27,990,000.
The Commitment requires that the Loan be secured by certain
real property and by certain tangible and intangible
personal property.
2. GRANTING CLAUSE
To secure the repayment of the Indebtedness, and in
consideration of the sum of ten dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which
are acknowledged, Grantor grants, bargains, sells, warrants,
conveys, alienates, releases, assigns, sets over and
confirms to Trustee, in trust with the power of sale for the
benefit of Beneficiary, and to his successors and assigns
forever, the Real Property, the Leases, the Rents, the
Assigned Rights, the Condemnation Proceeds, and the
Insurance Proceeds, and grants to Beneficiary a security
interest in the Personal Property.
3. DEFINED TERMS
Appurtenant Easements
means the declarations, easements, covenants,
restrictions and agreements, if any, identified on
the attached Exhibit A.
Assigned Rights
means all of Grantor's rights (whether presently
existing or arising in the future) under all
contracts, claims and licenses that relate to the
Real Property and may benefit its owner, including
air rights, mineral rights, water rights, claims
against third parties for damages to the Property,
construction, roof and equipment guarantees and
warranties, building licenses and permits,
management contracts, service contracts, leases of
Fixtures or of Personal Property, and all of
Grantor's right, title and interest (whether
presently existing or arising in the future) in
and to unearned insurance premiums, any greater
estate in the Real Property, trade names, property
management files, accounting books and records,
trademarks, tradestyles, service marks,
copyrights, accounting books and records, site
plans, surveys, blueprints, and construction
drawings, plans and specifications, and the work
product of architects, environmental consultants,
property tax consultants, engineers, and any other
third party contractors whose services benefit the
Real Property.
Assignment of Leases and Rents
means the Loan Document bearing this heading.
Business Day
means any day when state and federal banks are
open for business in Cedar Rapids, Iowa.
Condemnation Proceeds
means all money or other property that has been,
or is in the future, awarded or agreed to be paid
or given in connection with any taking by eminent
domain of all or any part of the Real Property
(including a taking through the vacation of any
street dedication or through a change of grade of
such a street), either permanent or temporary, or
in connection with any purchase in lieu of such a
taking, or as a part of any related settlement.
Conditional Grace Period
means a period of thirty (30) days, except when
applicable to a failure of any term, condition, or
provision under this Deed of Trust which arises
from facts, circumstances, acts, or omissions
which are not the fault of Grantor, in which in
which case Conditional Grace Period shall mean a
period of sixty (60) days.
Default
means any of the acts, omissions, or circumstances
specified in Section 10 below.
Environmental Indemnity Agreement
means each of the documents captioned
"Environmental Indemnity Agreement" executed with
respect to the Real Property and the real property
encumbered by the Other Deeds of Trust.
Environmental Laws
means all present and future laws, statutes,
ordinances, rules, regulations, orders, and
determinations of any Governmental Authority
pertaining to health, underground storage tank
regulation or removal, protection of the
environment, natural resources, wetlands,
conservation, wildlife, waste management,
regulation of activities involving Hazardous
Substances, and pollution, or relating to waste
disposal or environmental protection with respect
to the exposure to, or manufacture, possession,
presence, use, generation, storage,
transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal,
remediation or handling of any Hazardous
Substances, including, without limitation, the
Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601
et seq., the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C.
9601(20)(D), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., the Federal
Water Pollution Control Act, as amended by the
Clean Water Act , 33 U.S.C. 1251 et seq., the
Clean Air Act , 42 U.S.C. 7401 et seq. and the
Toxic Substances Control Act, 15 U.S.C. 2601 et
seq., all as amended from time to time.
ESA
means the written environmental site assessment of
the Real Property prepared by a consultant hired
directly by Beneficiary under the terms of the
Commitment.
Escrow Expenses
means those expenses in respect of Insurance
Premiums and Impositions that Beneficiary elects
to pay directly from the Escrow Fund using moneys
accumulated through the collection of Monthly
Escrow Payments.
Escrow Fund
means the accounting entry maintained on the books
of Beneficiary as funds available for the payment
of Escrow Expenses under the terms of this Deed of
Trust.
Financing Statements
means the Uniform Commercial Code financing
statements filed to perfect the security interests
securing the Indebtedness, as amended or extended
from time to time.
Fixtures
means all materials, supplies, equipment,
apparatus and other items now or hereafter
attached to or installed on the Real Property in a
manner that causes them to become fixtures under
the law of Maryland, including all built-in or
attached furniture or appliances, elevators,
escalators, heating, ventilating and air
conditioning system components, emergency
electrical generators and related fuel storage or
delivery systems, septic system components, storm
windows, doors, electrical equipment, plumbing,
water conditioning, lighting, cleaning, snow
removal, lawn, landscaping, irrigation, security,
incinerating, firefighting, sprinkler or other
fire safety equipment, bridge cranes or other
installed materials handling equipment, satellite
dishes or other telecommunication equipment, built-
in video conferencing equipment, sound systems or
other audiovisual equipment, and cable television
distribution systems. Fixtures do not include
trade fixtures, office furniture and office
equipment owned by tenants and neither necessary
nor desirable for the operation of the Real
Property as income-producing commercial real
estate.
Governmental Authority
means any political entity with the legal
authority to impose any requirement on the
Property, including the governments of the United
States, the State of Maryland, Anne Arundel
County, and any other entity with jurisdiction to
decide, regulate, or affect the ownership,
construction, use, occupancy, possession,
operation, maintenance, alteration, repair,
demolition or reconstruction of any portion or
element of the Real Property.
Hazardous Substances
means: (A) any hazardous wastes or toxic
chemicals, materials, substances or wastes as
defined by the Environmental Laws; (B) any "oil,"
as defined by the Clean Water Act and regulations
promulgated thereunder (including crude oil or any
fraction of crude oil); (C) any substance, the
presence of which is now or in the future
prohibited, regulated or controlled by any
Environmental Law or any other law, regulation,
statute or ordinance of any Governmental
Authority; (D) any asbestos or asbestos containing
materials, (E) any polychlorinated biphenyls
("PCBs"), (E) urea formaldehyde, (F) atmospheric
radon at levels over four picocuries per cubic
liter; (G) any solid, liquid, gaseous or thermal
irritant or contaminant, such as smoke, vapor,
soot, fumes, alkalis, acids, chemicals,
pesticides, herbicides, sewage, industrial sludge
or similar wastes, and (H) any industrial, nuclear
or medical by-products. However, "Hazardous
Substances" include neither (a) immaterial
quantities of automotive motor oil leaked
inadvertently from vehicles in the ordinary course
of the operation of the Real Property and cleaned
up in accordance with reasonable property
management procedures and any applicable law nor
(b) immaterial quantities of substances
customarily and prudently used in the cleaning and
maintenance of the Real Property in accordance
with any applicable law.
Impositions
means all real and personal property taxes;
general or special assessments; ground rent;
water, gas, sewer, vault, electric or other
utility rates and charges; common charges; owners'
association dues or fees; ground rent; personal
and ad valorem property taxes; fees for any
easement, license or agreement maintained for the
benefit of the Property; and any and all other
taxes, levies, user fees, claims, charges and
assessments whatsoever that at any time may be
assessed, levied or imposed on the Property or
upon its ownership, use, occupancy or enjoyment,
and any related costs, interest or penalties.
Improvements
means all buildings and improvements of any kind
erected or placed on the Land now or in the
future, including the Fixtures, together with all
appurtenant rights, privileges, easements,
tenements, hereditaments, titles, reversions,
remainders and other interests.
Indebtedness
means all sums that are owed or become due
pursuant to the terms of the Notes, this Deed of
Trust, or any of the other Loan Documents,
including scheduled principal payments, scheduled
interest payments, default interest, late charges,
prepayment premiums, accelerated or matured
principal balances, advances, collection costs,
receivership costs, fees and costs of the Trustee
and all other financial obligations of Grantor
incurred in connection with the Loan transaction.
Indemnity Agreements
means each of the documents captioned "Indemnity
Agreement" executed by American Industrial
Properties REIT of even date herewith.
Insurance Premiums
means all premiums or other charges required to
maintain in force any and all insurance policies
that this Deed of Trust requires that Grantor
maintain.
Insurance Proceeds
means all proceeds of all insurance now or
hereafter carried by or payable to Grantor with
respect to the Property, or the interruption of
rents or income derived from the Property, all
unearned insurance premiums and all related claims
or demands.
Land
that certain tract of land located in Anne Arundel
County, Maryland, which is described on the
attached Exhibit A, together with all
appurtenances, including all Grantor's right,
title and interest to and in the air space above
the Land and all alley, party wall, drainage,
sewer, mineral, water, oil and gas, vault and
other rights, estates, titles, interests,
privileges, easements, tenements, hereditaments,
titles, royalties, reversions, remainders and
other interests.
Leases
means all leases, subleases, licenses,
concessions, extensions, renewals and other
agreements (whether written or oral, and whether
presently effective or made in the future) through
which Grantor grants any possessory interest in
and to, or any right to occupy or use, all or any
part of the Real Property, and any related
guaranties.
Legal Requirements
means all laws, statutes, rules, regulations,
ordinances, judicial decisions, administrative
decisions, building permits, development permits,
certificates of occupancy, or other requirements
of any Governmental Authority.
Loan Agreement
means that certain Loan Agreement of even date
herewith, by and among, Grantor, Beneficiary, and
American Industrial Properties REIT, wherein
Beneficiary agrees to make the Loan to Grantor.
Loan Documents
means all documents evidencing the Loan or
delivered in connection with the Loan (including
the Notes, this Deed of Trust, and the Other Deeds
of Trust), whether entered into at the closing of
the Loan or in the future, other than the
Environmental Indemnity Agreements and the
Indemnity Agreements, which are not Loan Documents
and are not secured hereby.
Monthly Escrow Payment
means the sum of the Monthly Imposition
Requirement, the Monthly Insurance Premium
Requirement, and the Monthly Reserve Requirement.
Monthly Imposition Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and, if future Impositions are as
yet undetermined, on a 5% annual inflation factor)
will be required to permit the timely payment of
the Impositions by Beneficiary.
Monthly Insurance Premium Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and using, if future Insurance
Premiums are as yet undetermined, a 5% inflation
factor) will be required to permit the timely
payment of the Insurance Premiums by Beneficiary.
Monthly Reserve Requirement
means the amount that Beneficiary estimates will,
over the subsequent twelve months, result in the
accumulation of a surplus in the Escrow Fund equal
to one-sixth of the sum of the Annual Imposition
Requirement and the Annual Insurance Premium
Requirement.
Note
means any one of the ten promissory notes made by
Grantor in the aggregate amount of $27,990,000,
together with all extensions and modifications. .
Notes
means the ten promissory notes made by Grantor in
the aggregate amount of $27,990,000, together with
all extensions and modifications of any one or
more of them.
Notice
means a notice given in accordance with the
provisions of Subsection 25.10.
Obligations
means all of the obligations required to be
performed under the terms and conditions of any of
the Loan Documents by any person other than the
Trustee or Beneficiary.
Obligor
means Grantor or any other natural person, trust
or business organization that is liable under the
Loan Documents for the payment of any portion of
the Indebtedness, or the performance of any other
Obligation, under any circumstances.
Other Deeds of Trust
means the three other Deeds of Trust and Security
Agreements executed by Grantor of even date
herewith for the benefit of Beneficiary as
security for the Notes and encumbering, inter
alia, real property owned by Grantor in the States
of California and Texas.
Permitted Encumbrances
means the encumbrances or other matters listed on
Exhibit B.
Permitted Transfer
means a transfer specifically described in Section
11 as permitted.
Personal Property
means all materials, appliances, equipment or
items located at the Real Property now or in the
future and that may be incorporated in the Real
Property through construction, attachment, or
installation, or that are used, or are capable of
being used, in the operation of the Real Property
as commercial real estate, including (i)
appliances, equipment or items required under any
lease to be provided by Grantor to any tenant,
(ii) materials or equipment for use in the
maintenance, alteration, landscaping or repair of
the Real Property, including snow removal, lawn,
landscaping, irrigation, security, incineration,
and hazardous waste storage, monitoring, testing,
containment or abatement supplies and equipment;
(iii) electrical lights and fixtures (whether or
not permanently wired), backup generators and
related fuel storage and delivery systems, (iv)
rugs, carpeting, office furnishings, art work,
decorations, window treatments and equipment
located in any on-site leasing office, located in
any lobby, hall or other common area, or used in
connection with any "executive suites" operation,
(v) vehicles used to transport prospective tenants
or to maintain or operate the Real Property, (vi)
components of heating, ventilation and air
conditioning systems and air quality testing
equipment, (vii) spare or detached parts for
elevators, escalators or other mechanical systems,
(viii) all site or building plans and
specifications, construction records, and
architectural or engineering drawings relating to
the Real Property, (ix) sewer or septic system
components, (x) water wells, whether for purposes
of water supply or groundwater testing or
sampling, (xi) components of plumbing and water
conditioning systems, (xii) firefighting,
sprinkler or other fire safety equipment, (xiii)
central telephone switches, antennae, satellite
dishes or other telecommunication equipment, and
(xiv) video conferencing equipment, audio
equipment and cable television distribution
systems.
Property
means the Real Property, the Personal Property,
the Leases, the Rents, the Assigned Rights, the
Condemnation Proceeds and the Insurance Proceeds.
Real Property
means the Land, the Improvements, the Fixtures,
and all of Grantor's right, title and interest to
all appurtenant rights, privileges, tenements,
hereditaments, easements, or other interests that
run with the Land, including any Appurtenant
Easements, benefits of railroad sidings, drainage
rights, sewer rights and rights of ingress and
egress.
Recourse Obligations
means the recourse obligations, or "carveouts,"
that are defined in the Notes and in Section 21.
Rents
means all rents, lease termination fees, proceeds
of letters of credit or other devices securing
future rental payments, revenues, income,
proceeds, royalties, profits and other benefits
paid or payable for using, leasing, licensing,
possessing, operating from or in, residing in,
selling, mining, extracting, or otherwise enjoying
the Real Property, whether presently existing or
arising in the future, to which Grantor may now or
hereafter become entitled or may demand or claim.
Threshold Number
means $250,000.
Trustee
means Richard L. Reppert and his successors and
assigns.
4. TITLE
Grantor represents to and covenants with Beneficiary and
with its successors and assigns, that at the point in time
of the grant of the lien created by this Deed of Trust,
Grantor is well seized of good and indefeasible estate to
the Real Property, in fee simple absolute, subject to no
lien or encumbrance except the Permitted Encumbrances.
Grantor has good and merchantable title to the Personal
Property, and has the uncontestable right to grant a first
priority security interest in the Personal Property, free of
any rights of lessors or of sellers under conditional sales
contracts or other financing arrangements. Grantor warrants
this estate and title to Beneficiary and to its successors
and assigns forever, against all lawful claims and demands.
Grantor shall maintain mortgagee title insurance from a
solvent carrier, insuring Beneficiary in the amount of
$3,112,500 or such lesser amount agreed upon by Beneficiary,
that the Deed of Trust constitutes the first and best lien
on the Real Property. This Deed of Trust is and shall
remain a valid and enforceable first lien on the Real
Property, and if the validity or enforceability of this
first lien is attacked or called into question, Grantor
shall diligently and continuously defend it through
appropriate proceedings. Should it fail to do so,
Beneficiary may at Grantor's expense take all necessary and
proper action, including the engagement and compensation of
legal counsel, the prosecution or defense of litigation, and
the compromise or discharge of claims. Grantor shall defend,
indemnify and hold Beneficiary harmless in any suit or
proceeding brought to challenge or attack the validity,
enforceability or priority of the lien granted by this Deed
of Trust. If a prior mechanics' or materialmen's lien on
the Real Property arises by operation of statute during any
construction or repair of the Improvements, Grantor shall
either cause the lien to be discharged by paying when due
any amounts owed to such persons, or shall comply with
Section 12 of this Deed of Trust.
5. REPRESENTATIONS AND WARRANTIES
Grantor (i) represents to Beneficiary, and to its successors
and assigns, that the following statements are true as of
the date of this Deed of Trust, and (ii) warrants to
Beneficiary, and to its successors and assigns, that the
following statements shall remain true during the term of
the Loan:
5.1 Formation and Existence
Grantor is a limited partnership duly formed and
validly existing under the laws of Delaware, is duly
qualified to do business in and is in good standing
under, the laws of Maryland, and has obtained all
licenses and permits and filed all statements of
fictitious name and registrations necessary for the
lawful operation of its business.
5.2 Power and Authority
Grantor has full power and authority to carry on its
business as presently conducted, to own the Property,
to execute and deliver the Loan Documents that it has
executed, and to perform its obligations under them.
5.3 Due Authorization
The Loan transaction and the performance of all of
Grantor's obligations under the Loan Documents have
been duly authorized by all requisite partnership
action, and each individual executing any Loan Document
on behalf of Grantor has been duly authorized to do so.
5.4 No Default or Violations
The execution and performance of Grantor's obligations
under the Loan Documents will not result in any breach
of, or constitute a default under, any contract,
agreement, document or other instrument to which
Grantor is a party or by which Grantor may be bound or
affected, and do not and will not violate or contravene
any law to which Grantor is subject; nor do any such
other instruments impose or contemplate any obligations
which are or will be inconsistent with the Loan
Documents.
5.5 No Further Approvals or Actions Required
No approval by, authorization of, or filing with any
federal, state or municipal or other governmental
commission, board or agency or other governmental
authority is necessary in connection with the
authorization, execution and delivery of the Loan
Documents by Grantor.
5.6 Due Execution and Delivery
Each of the Loan Documents to which Grantor is a party
has been duly executed and delivered on behalf of
Grantor.
5.7 Legal, Binding, Valid and Enforceable
Each of the Loan Documents to which Grantor is a party
constitutes the legal, valid and binding obligation of
Grantor, enforceable against Grantor in accordance with
its terms, except to the extent that its enforceability
may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights
generally or by equitable principles of general
application (whether considered in an action at law or
in equity).
5.8 Accurate Financial Information
All financial information furnished by Grantor to
Beneficiary in connection with the application for the
Loan is true, correct and complete in all material
respects and does not omit to state any fact or
circumstance necessary to make the statements in them
not misleading, and there has been no material adverse
change in the financial condition of Grantor since the
date of such financial information.
5.9 Compliance with Legal Requirements
All governmental approvals, and licenses required in
order for Grantor to conduct its business and maintain
and operate the Real Property in compliance with
applicable law are in full force and effect, and the
Real Property currently is being operated in compliance
with all applicable legal requirements in all material
respects.
5.10 Contracts and Franchises
All contracts and franchises necessary in order for
Grantor to conduct its business and operate the Real
Property in accordance with good commercial practice
are in force.
5.11 No Condemnation Proceeding
The Grantor has no knowledge of any present, pending or
threatened condemnation proceeding or award affecting
the Real Property.
5.12 No Casualty
No damage to the Real Property by any fire or other
casualty has occurred and remained unrepaired.
5.13 Complete Lots and Tax Parcels
The Land is comprised exclusively of tax parcels that
are entirely included within the Land, and of
subdivision lots that are entirely included within the
Land.
6. COVENANTS
6.1 Payment and Performance
Grantor shall pay the Indebtedness and perform all of
its other obligations under the Loan Documents, as and
when the Loan Documents require such payment and
performance.
6.2 Payment of Impositions
The Grantor shall pay the Impositions on or before the
last day on which they may be paid without penalty or
interest, and shall, within thirty days of such
payment, furnish Beneficiary with a paid receipt or a
canceled check as evidence of payment. If Beneficiary
does not receive such evidence, Beneficiary may secure
it directly. If it does so, Beneficiary will charge
Grantor an administrative fee of $250 for securing the
evidence of payment. This fee will be a demand
obligation under the terms of this Deed of Trust. The
Grantor may meet the requirements of this Subsection by
remitting the Monthly Escrow Payments when due, by
immediately providing notice to Beneficiary of any new
Imposition or increased Imposition unknown to
Beneficiary, and by paying to Beneficiary on demand any
amount required to increase the Escrow Fund to an
amount sufficient to permit Beneficiary to pay all
Impositions from the Escrow Fund on time. If Grantor
wishes to contest the validity or amount of an
Imposition, it may do so by complying with Section 12.
If any new Legal Requirement taxes the Deed of Trust so
that the yield on the Indebtedness would be reduced,
and Grantor may lawfully pay the tax or reimburse
Beneficiary for its payment, Grantor shall do so.
6.3 Maintenance of the Real Property
Grantor shall not commit or permit any waste of the
Real Property as a physical or economic asset, and
agrees to maintain in good repair the Improvements,
including structures, roofs, mechanical systems,
parking lots or garages, and other components of the
Real Property that are necessary or desirable for the
use of the Real Property, or which Grantor as landlord
under any Lease is required to maintain for the benefit
of any tenant. In its performance of this obligation,
Grantor shall promptly and in a good and workmanlike
manner repair or restore any elements of the
Improvements that are damaged or destroyed as required
under Subsection 6.4. The Grantor shall also replace
roofs, parking lots, mechanical systems, and other
elements of the Real Property requiring periodic
replacement. The Grantor shall carry out such
replacements no less frequently than would any
commercially reasonable owner intending to maintain the
maximum income-generating potential of the Real
Property over its reasonable economic life. Grantor
shall not, without the prior written consent of
Beneficiary, demolish, reconfigure, or materially alter
the Improvements, but Beneficiary agrees that any
request for its consent to such an action shall be
deemed given if Beneficiary declines to respond within
fifteen (15) Business Days to any written request for
such a consent, if the request is accompanied by all
materials required to permit Beneficiary to analyze the
proposed action.
6.4 Use of the Real Property
Grantor shall cause the Real Property to be used as a
service center, office, or warehouse property and for
no other purpose.
6.5 Independence of the Real Property
The Grantor shall maintain the independence of the Real
Property from other land and improvements not included
within or located on the Land. In fulfilling this
covenant, Grantor shall neither take any action which
would make it necessary to own or control any property
other than the Real Property in order to meet the
obligations of the landlord under any Lease, or in
order to comply with the Legal Requirements, nor take
any action which would cause any land or improvements
other than the Land and the Improvements to rely upon
the Land or the Improvements for those purposes, nor
impair the integrity of the Land as one or more
complete subdivided lots and tax parcels.
6.6 Rebuilding upon Casualty and Remediation of Effect of
Condemnation
If a casualty occurs, Grantor shall rebuild the
Improvements. If any portion of the Real Property is
taken by power of eminent domain, Grantor shall remedy
its effects. In either case, the rebuilding or
remediation shall restore the Real Property's value and
potential to generate income in proportion to the
amount of the Indebtedness remaining after any
application of Insurance Proceeds or Condemnation
Proceeds to the Indebtedness.
6.7 Performance of Landlord Obligations
Grantor shall perform its obligations as landlord under
the Leases, and shall neither take any action, nor fail
to take any action, if the action or failure would be
inconsistent with the commercially reasonable
management of the property for the purpose of enhancing
its long-term performance and value. Grantor shall
not, without Beneficiary's written consent, extend,
modify, terminate or enter into any lease of the Real
Property, except in compliance with the Agreement
Regarding Leasing, which Beneficiary and Grantor have
entered into today, and which grants certain rights,
personally, to Grantor.
6.8 Financial reports and Operating Statements
During the term of the Loan, Grantor shall maintain
complete and accurate accounting and operational
records, including copies of all Leases and other
written contracts relating to the Real Property, copies
of all tax statements, and evidence to support the
payment of all material property-related expenses.
Within 120 days of the end of each fiscal year, Grantor
shall deliver to Beneficiary (A) copies of the
consolidated financial statements of Grantor and its
general partner, prepared by an independent certified
public accountant in accordance with generally accepted
accounting principles, consistently applied, (B) a
complete and accurate operating statement for the Real
Property, and (C) a complete rent roll (listing
tenants, unit numbers, square feet occupied and leased,
rents, delinquencies, vacancies, other income received
and expenses), all certified as true and correct by
Grantor and in form satisfactory to Beneficiary. If
Grantor fails to deliver the items required in this
Subsection, Beneficiary may engage an accounting firm
to prepare the required items. In connection with the
engagement of this firm and its supervision, Grantor
shall pay Beneficiary an administrative fee of $1,000.
Grantor shall cooperate fully with any investigative
audit required to permit the accounting firm to produce
these items, and the fees and expenses incurred in
connection with their preparation shall be paid by
Grantor on demand.
7. INSURANCE REQUIREMENTS
At all times until the Indebtedness is paid in full, Grantor
shall maintain insurance coverage and administer insurance
claims in compliance with this Section.
7.1 Required Coverages
(a) All Risk/Open Perils Special Form Property
The Grantor shall maintain coverage of 100% of the
replacement cost of all insurable elements of the
Real Property all tangible Personal Property. If
a coinsurance clause is in effect, an agreed
amount endorsement is required. Blanket policies
must include limits by property location.
Coverage shall extend to the Real Property and to
all tangible Personal Property.
(b) Broad Form Boiler and Machinery
If any such item is located on or about the Real
Property, Grantor shall maintain this coverage,
including a form of business income coverage.
(c) Flood
If the Real Property is located in a special flood
hazard area according to the most current flood
insurance rate map issued by the Federal Emergency
Management Agency and if flood insurance is
available, Grantor shall maintain flood insurance
coverage of all insurable elements of Real
Property and of all tangible Personal Property.
(d) Business Interruption
The Grantor shall maintain a form of business
income coverage in the amount of 80% of one year's
business income from the Property. Blanket
policies must include limits by property location.
(e) Comprehensive/general liability
The Grantor shall maintain such coverage (which
may be in the form of umbrella/excess liability
insurance) with a $1,000,000 combined single limit
per occurrence and a minimum aggregate limit of
$2,000,000.
(f) Liquor liability
The Grantor shall maintain such coverage, if
applicable law may impose liability on those
selling, serving, or giving alcoholic beverages to
others and if such beverages will be sold, served
or given on the Real Property by Grantor.
(g) Elective coverages
Beneficiary may require additional coverages
appropriate to the property type and site
location. Additional coverages may include
earthquake, mine subsidence, sinkhole, personal
property, supplemental liability, or coverages of
other property-specific risks.
7.2 How Beneficiary Should Be Named
On all property policies and coverages (including
coverage against loss of business income), Beneficiary
must be named as "first mortgagee" under a standard
mortgage clause. On all liability policies and
coverages, Beneficiary must be named as an "additional
insured." Beneficiary should be referred to verbatim as
follows: "Life Investors Insurance Company of America
and its successors, assigns, and affiliates; as their
interest may appear; c/o AEGON USA Realty Advisors,
Inc.; Mortgage Loan Dept.; 4333 Edgewood Rd., NE; Cedar
Rapids, Iowa 52499-5223."
7.3 Rating
Each insurance carrier must be rated A, Class XII, or
better by Best's Rating Service, without regard to its
parent's or any reinsurer's rating.
7.4 Deductible
The maximum deductible on all coverages and policies is
$25,000.
7.5 Notices, Changes and Renewals.
All policies must require the insurance carrier to give
Beneficiary a minimum of thirty (30) days notice in the
event of cancellation or non-renewal. Grantor shall
report to Beneficiary immediately any vacancy, change
of title, tenant occupancy or use, physical damage,
additional improvements or other factors affecting any
insurance contract. An original or certified copy of
each policy is required upon renewal. If no such copy
is available, Beneficiary will accept a binder for a
period not to exceed 90 days. All binders,
certificates of insurance, and original or certified
copies of policies must name Beneficiary as a named
insured, or as an additional insured, must include the
complete and accurate property address and must bear
the original signature of the issuing insurance agent.
7.6 Unearned Premiums
If this Deed of Trust is foreclosed, Beneficiary may at
its discretion cancel any of the insurance policies
required under this Section and apply any unearned
premiums to the Indebtedness.
7.7 Forced Placement
If Grantor fails to comply with the requirements of
this Section, the Beneficiary may, at its discretion,
procure any required insurance. Any premiums paid for
such insurance, or the allocable portion of any premium
paid by Beneficiary under a blanket policy for such
insurance, shall be a demand obligation under this Deed
of Trust, and any unearned premiums under such
insurance shall comprise Insurance Proceeds and
therefore a portion of the Property.
8. INSURANCE AND CONDEMNATION PROCEEDS
8.1 Adjustment of Insurance Claims and Compromise of
Condemnation Awards
The Grantor may settle any insurance claim or
condemnation proceeding if the effect of the casualty
or the condemnation may be remediated for $50,000 or
less. If a greater sum is required, Grantor may not
settle any such claim or proceeding without the advance
written consent of Beneficiary. If a Default exists,
Grantor may not settle any insurance claim or
condemnation proceeding without the advance written
consent of Beneficiary.
8.2 Direct Payment to Beneficiary of Proceeds
If the Insurance Proceeds received in connection with a
casualty or the Condemnation Proceeds received in
respect of a condemnation exceed $50,000, or if there
is a Default, then such proceeds shall be paid directly
to Beneficiary. Beneficiary shall have the right to
endorse instruments that evidence proceeds which it is
entitled to receive directly.
8.3 Availability to Grantor of Proceeds
Grantor shall have the right to use the Insurance
Proceeds or the Condemnation Proceeds to rebuild the
Improvements following a casualty, or the remedy the
effect on the Real Property of any condemnation, if the
amount received is less than the Threshold Number,
provided (a) no condition of Default then exists, (b)
no Default with respect to any payment obligation under
any of the Loan Documents shall have occurred during
the preceding twelve months, (c) no nonmonetary default
shall have occurred, been noticed and remained uncured
beyond the applicable cure period and (d) the proceeds
received by Beneficiary, together with any additional
funds deposited with Beneficiary by Grantor, are then
sufficient, in Beneficiary's discretion, to restore the
Improvements to their condition before the casualty, or
to remedy the effect on the Real Property of the
condemnation. Beneficiary may condition disbursements
on approval of plans and specifications, minimum
disbursement requirements, submittal of certificates of
occupancy and other appropriate evidence of completion,
updating of Beneficiary's mortgagee title insurance
coverage to insure the absence of mechanics' or
materialmen's liens, disbursement on a percentage of
completion basis with a ten percent holdback on all
disbursements pending final completion, and other
customary safeguards for construction lenders. All
transactional expenses shall be paid by Grantor. If
the amount received in respect of a casualty or
condemnation equals or exceeds the Threshold Number,
then such proceeds may, at Grantor's option, be used to
rebuild or to remedy subject to all of the provisions
and procedures described above, but only if the Loan-to-
Value ratio of the Property on completion will be 75%
or less, as determined by Beneficiary based on its
appraisal review, as determined by repeating the
appraisal procedure described in Section 4.2.1 of the
Commitment. If necessary, Grantor shall make a
prepayment of the Loan, without premium, sufficient to
achieve this Loan-to-Value ratio. The independent fee
appraisal shall be at Grantor's expense, and Grantor
shall pay Beneficiary an administrative fee of $2,500
in connection with its review. Beneficiary may require
that Grantor deposit $10,000 with Beneficiary as
security for these expenses or may pay the fee
appraiser's and administrative fees from the proceeds
at its sole discretion.
Unless Grantor has the right to use the Insurance
Proceeds or the Condemnation Proceeds under the
foregoing paragraph, Beneficiary may, in its sole and
absolute discretion, either apply them to the Loan
balance or disburse them for the purposes of repair and
reconstruction, or to remedy the effects of the
condemnation. No prepayment premium will be charged on
amounts applied to reduce the principal balance of the
Loan.
9. ESCROW FUND
The Grantor shall pay the Monthly Escrow Payment on the
first day of every month, commencing January 1, 1997. Any
Monthly Escrow Payment received after the tenth day of the
month in which it is due shall be subject to a late charge
of five percent, which shall not be applied to the Escrow
Fund. Beneficiary shall hold Monthly Escrow Payments in a
fund from which Beneficiary will pay Escrow Expenses that
Beneficiary has anticipated will become payable on a regular
basis during the Loan's term, and on which Beneficiary has
based its determination of the Monthly Imposition
Requirement, the Monthly Insurance Premium Requirement and
the Monthly Reserve Requirement. The Escrow Fund will be
maintained as an accounting entry in Beneficiary's general
account, where it may be commingled with Beneficiary's other
funds. Beneficiary may reanalyze the projected Escrow
Expenses from time to time and shall advise Grantor of any
change in the amount of the Monthly Escrow Payment. Grantor
hereby grants to Beneficiary a security interest in the
Escrow Fund and agrees that, upon the foreclosure of the
Deed of Trust, the delivery of a deed in lieu of
foreclosure, or the payoff of the Loan, Beneficiary may
apply amounts in the Escrow Fund, net of accrued Escrow
Expenses, to the Indebtedness. Beneficiary shall remit any
amounts in excess of the Indebtedness to Grantor.
10. DEFAULT
10.1 Existence of Default
A Default shall exist immediately upon the occurrence
of any of the acts, omissions or circumstances
specified in Subsection 10.2 or in Subsection 10.4.
Upon the occurrence of any of the acts, omissions or
circumstances specified in Subsection 10.3, Beneficiary
may deliver written Notice to Grantor of the existence
of such an act, omission or circumstance, and that such
an act, omission or circumstance shall, if uncured
within the Conditional Grace Period, constitute a
Default under the Loan Documents. A Default shall
exist if the act, omission or circumstance has not been
cured prior to expiration of the Conditional Grace
Period, or if, following such NoticeGrantor either
ceases to pursue the cure of such an act, omission or
circumstance with diligence, or repudiates its
obligation to effect such a cure.
10.2 Monetary Defaults
A monetary default shall exist upon any of the
following:
(a) Monthly Principal and Interest Payments
The Grantor's failure to pay, or to cause to be
paid, any regular monthly payment of principal and
interest due under any of the Notes, or any
required Monthly Escrow Payment, so that
Beneficiary receives the payment on or before the
tenth day of the month in which the payment is
due;
(b) Matured Indebtedness
The Grantor's failure to pay, or to cause to be
paid, the Indebtedness when the Loan matures by
acceleration under Section 13, because of a
transfer or encumbrance under Section 16, or by
lapse of time;
(c) Demand Obligations
The Grantor`s failure to pay, or to cause to be
paid, within five Business Days of Beneficiary's
written demand, any other amount due under this
Deed of Trust or any of the other Loan Documents;
10.3 Curable Nonmonetary Default
A curable nonmonetary default shall exist upon any of
the following:
(a) Entry of a Material Judgment
The entry of any judgment against Grantor or any
other Obligor, if the judgment may materially and
adversely affect the value, use or operation of
the Real Property;
(b) Tax Lien
The filing of any federal, state or local tax lien
against Grantor or any other Obligor, or against
the Real Property.
(c) Failure of Warranty
Any representation made in Section 5 or warranted
in any other Loan Document shall become untrue or
misleading in any material respect.
(d) Other Defaults
The Grantor's failure to observe any promise or
covenant made in this Deed of Trust or any other
Loan Document, if the failure is not described in
Subsection 10.2, in Subsection 10.4, or elsewhere
in this Subsection 10.3.
10.4 Incurable Nonmonetary Default
An incurable nonmonetary default shall exist upon any
of the following:
(a) Material Untruth or Misrepresentation
Beneficiary`s discovery that any representation
made by Grantor or by any other Obligor in any
Loan Document in connection with the Loan was
untrue or misleading in any material respect at
the time it was made.
(b) Voluntary Bankruptcy Filing
The filing by Grantor or by any other Obligor of a
petition in bankruptcy or for relief from
creditors under any present or future law that
affords general protection from creditors.
(c) Involuntary Bankruptcy or Similar Filing
The Grantor or any other Obligor becomes the
subject of an involuntary petition in bankruptcy
or of any other action that may result in a
composition of its debts, that may provide for the
marshaling of its assets for the satisfaction of
Grantor's or such other Obligor's debts, or that
may result in the judicially ordered sale of the
its assets for the purpose of satisfying its
obligations to creditors, unless a motion for the
dismissal of the petition or other action is filed
within ten days and results in its dismissal
within sixty days of the filing of the petition or
other action.
(d) Insolvency
An adjudication that Grantor or any other Obligor
is insolvent.
(e) Receivership
The appointment of a receiver or trustee to take
possession of any of the assets of Grantor or of
any other Obligor unless a motion for the
dismissal of the appointment is filed within ten
days and results in dismissal of the receiver or
trustee within thirty days of the filing of the
petition or other action.
(f) Levy or Attachment
The taking or seizure of any material portion of
the Property under levy of execution or attachment
unless a motion for the dismissal of the petition
or other action is filed within ten days and
results in its dismissal within ten days of the
filing of the petition or other action.
(g) Death, Dissolution or Liquidation
The dissolution or liquidation of any Obligor that
is not a natural person, or the cessation of its
legal existence shall cease, or the death of any
Obligor who is a natural person (unless the
dissolution, liquidation, cessation or death
results in a Permitted Transfer).
(h) Abandonment
The Grantor's abandonment of the Real Property.
(i) Impairment of the Lien by Legal Requirement
The promulgation by any Governmental Authority of
a Legal Requirement, or a ruling by a court of
competent jurisdiction, if the effect of the Legal
Requirement or ruling is to make the payment of
the Indebtedness unlawful or usurious, to prevent
Grantor or any other Obligor from legally
performing any material obligation under any Loan
Documents, to materially impair the right of
Beneficiary to accelerate the Indebtedness upon
the occurrence of a material Default, or to
materially impair the right of Beneficiary, upon
the failure of Grantor to pay the Indebtedness at
its maturity through acceleration or lapse of
time, to cause the sale of the Real Property and
the to apply the proceeds of the sale to the
Indebtedness.
(j) Impairment of Yield through Taxation
The promulgation of any Legal Requirement that
taxes the Deed of Trust so that the yield on the
Indebtedness would be reduced, if Grantor may
neither lawfully pay the tax nor lawfully
reimburse Beneficiary for its payment.
(k) Proceeding to Contest Lien
The Grantor's institution of any proceeding to
contest the validity of Beneficiary's lien on the
Property.
11. RIGHT TO CURE
Upon Default or upon the failure of Grantor, following a
notice given under Subsection 10.3, to diligently pursue the
cure of any act, omission or circumstance that may cause
Default, Beneficiary shall have the right to cure the
Default or the act, omission or circumstance. The expenses
of doing so shall be part of the Indebtedness, and Grantor
shall pay them to Beneficiary on demand.
12. CONTEST RIGHTS
The Grantor may secure the right to contest Impositions and
mechanics' or materialmen's liens, through appropriate
proceedings conducted in good faith, by depositing with
Beneficiary an amount equal to 125% of the amount of the
Imposition or the lien, or by depositing a bond or other
security acceptable to Beneficiary in its sole discretion.
If the contest of the related Imposition or lien is
unsuccessful, Beneficiary shall use the amount deposited, or
the proceeds of the bond or other security, to pay the
Imposition or to satisfy the obligation from which the lien
has arisen. Any surplus shall be refunded to Grantor.
13. DUE ON TRANSFER OR ENCUMBRANCE
Except as expressly permitted by the terms of the Loan
Agreement, upon the sale of any portion of the Real
Property, or upon any other conveyance, transfer or vesting
of any direct or indirect interest in Grantor or the
Property, including (i) the direct or indirect transfer of,
or the granting of a security interest in, the ownership of
Grantor, (ii) any encumbrance (other than a Permitted
Encumbrance) of the Real Property and (iii) the granting of
any security interest in the Property, the Indebtedness
shall, at Beneficiary's option, become immediately due and
payable without notice, unless the sale, conveyance,
transfer or vesting is a Permitted Transfer.
14. PERMITTED TRANSFER
14.1 Certain Transfers of Limited Partnership Interests
Transfers of limited partnership interests in the
Borrower that do not result in a loss of American
Industrial Properties REIT's majority control of the
Borrower shall constitute Permitted Transfers.
14.2 Transfer to an Approved Purchaser
The Grantor shall have the right, on one occasion
during the term of the Loan, to sell or transfer the
Property (together with all other real and personal
property then securing the Notes) in a transaction
approved by Beneficiary. Beneficiary agrees to approve
a transfer if the following conditions are satisfied:
(a) No Default
No Default shall exist, and no act, omission or
circumstance shall exist which, if uncured
following notice and the passage of time, would
become a Default.
(b) Request and Supporting Materials
Beneficiary shall receive a written request for
its approval at least sixty days in advance notice
of the proposed transfer. The request shall
specify the identity of the proposed transferee
and the terms of the transaction, and shall be
accompanied by the financial statements, tax
returns, and organizational documents of the
proposed transferee and its principals.
(c) Criteria to be Considered
The financial strength, credit history and
demonstrated property management expertise of the
proposed transferee and its principals shall be
satisfactory to Beneficiary in its sole
discretion. Beneficiary expressly reserves the
right to withhold its approval of the proposed
transfer if the proposed transferee or any of its
principals is or has been the subject of any
bankruptcy, insolvency, or similar proceeding.
(d) Assumption Agreement
Under the terms of the proposed transfer, the
proposed transferee shall assume the Loan, without
modification, under the terms of an assumption
agreement and additional documentation
satisfactory to Beneficiary in form and substance.
(e) Retention of Recourse Obligations
Under the terms of the assumption agreement and
additional documentation, liability for Recourse
Obligations arising after the date of the transfer
and assumption shall be assumed by the principals
of the proposed transferee, and liability for
Recourse Obligations arising before or in
connection with the transfer shall be retained by
those liable for them before the transfer.
(f) Title Insurance Endorsement
The Grantor shall agree to provide an endorsement
to Beneficiary's mortgagee title insurance policy,
insuring the continued validity and priority of
the Deed of Trust following the assumption.
(g) Assumption Fee
Beneficiary shall receive an assumption fee of
1.25 percent of the outstanding balance of the
Loan at the time of the sale or transfer, and
Grantor shall agree to reimburse Beneficiary's out-
of-pocket expenses incurred in connection with the
proposed transfer, including title, recording, and
attorneys' fees, regardless of whether the
transfer is consummated.
15. NOTICE OF ASSIGNMENT OF LEASES AND RENTS
Under the Assignment of Leases and Rents, Grantor has
assigned to Beneficiary, and to its successors and assigns,
all of Grantor's right and title to, and interest in, the
Leases, including all rights under the Leases and all
benefits to be derived from them. The rights assigned
include all authority of Grantor to modify or terminate
Leases, or to exercise any remedies, and the benefits
assigned include all Rents. This assignment is present and
absolute, but under the terms of the Assignment of Leases
and Rents, Beneficiary has licensed Grantor to collect and
use the Rents, and to exercise the rights assigned in this
paragraph, in any way that is consistent with its
obligations under the Loan Documents, under its terms. This
license, however, expires upon the maturity of the Loan by
acceleration or by lapse of time. Beneficiary may terminate
the license by written notice upon either (i) Default or
(ii) the occupancy of more than one-half of the leasable
space in the Improvements by a single tenant that is the
subject of a petition under the Bankruptcy Code, that has
threatened to file such a petition, or whose insolvency is
imminent. If the license to collect rents is terminated
under clause (ii) and there is no Default, then Beneficiary
shall collect the Rent directly, apply it to that portion of
the Indebtedness then due and payable, and promptly remit
any excess amount to Grantor. Grantor shall promptly remit
to Beneficiary any Rents it receives after the expiration or
termination of Grantor's license to collect the Rents.
16. ACCELERATION
Under the terms of the Notes, if a Default exists,
Beneficiary may, at its option, without Notice to Grantor,
declare the Indebtedness to be immediately due and payable.
17. RIGHTS OF ENTRY AND TO OPERATE
17.1 Entry on Property
If a Default exists, Beneficiary may without notice
enter upon the Real Property and take exclusive
possession of the Real Property and of all books,
records and accounts, all without notice and without
being guilty of trespass. If Grantor remains in
possession of all or any part of the Property after
Default and without Beneficiary's prior written
consent, Beneficiary may, without notice to Grantor,
invoke any and all legal remedies to dispossess
Grantor.
17.2 Operation of Property
If a Default exists, Beneficiary may hold, lease,
manage, operate or otherwise use or permit the use of
the Real Property, either itself or by other persons,
firms or entities, in such manner, for such time and
upon such other terms as Beneficiary may deem to be
prudent and reasonable under the circumstances (making
such repairs, alterations, additions and improvements
thereto and taking any and all other action with
reference thereto, from time to time, as Beneficiary
deems necessary or desirable), and apply all Rents and
other amounts collected by Beneficiary in accordance
with the provisions of the Assignment of Leases and
Rents.
18. RECEIVERSHIP
If a Default exists, Beneficiary may apply to a court of
competent jurisdiction for the appointment of a receiver of
the Property, whether or not the value of the Property
exceeds the Indebtedness, whether or not waste or
deterioration of the Real Property has occurred, and whether
or not other arguments based on equity would justify the
appointment. Grantor irrevocably consents to such an
appointment. Any such receiver shall have all the rights
and powers customarily given to receivers in Maryland,
including the rights and powers granted to Beneficiary by
this Deed of Trust, the power to maintain, lease and operate
the Real Property on terms approved by the court, and the
power to collect the Rents and apply them to the
Indebtedness or otherwise as the court may direct. Once
appointed, a receiver may at Beneficiary's option remain in
place until the Indebtedness has been paid in full.
19. FORECLOSURE
Upon the existence of Default, Beneficiary may immediately
proceed to foreclose the lien of this Deed of Trust against
all or part of the Real Property by foreclosure sale in
accordance with the laws of Maryland.
Specifically, Grantor declares that, upon the occurrence of
Default, Grantor assents to the passing of a decree for the
sale of all or part of the Property in accordance with the
Real Property Article of the Code of Public General laws of
Maryland and subtitle W of the Maryland Rules, as amended or
supplemented, and the Trustee, or any other person
designated by the Beneficiary shall have the power to and
may, and at the request of Beneficiary, shall sell, assign,
transfer and deliver, all or any part of the Property, at
such time and place in Anne Arundel County, Maryland, as the
Beneficiary shall deem advantageous and proper and without
regard to any right of Grantor or any other person to the
marshaling of assets, for cash, on credit or for other
property, for immediate or future delivery, and for such
price or prices and on such terms and after such advertising
as Beneficiary shall deem advantageous and proper, after
filing any necessary papers in the appropriate court of Anne
Arundel County, Maryland, posting any necessary bond, giving
public notice and giving notice to Grantor in the manner and
at the address specified in Subsection 25.10, all subject to
and in accordance with the requirements of applicable law.
The Real Property shall be sold at public sale, in one
parcel or in such parcels, manner or order as Beneficiary
may elect, and any Fixtures or Personal Property encumbered
by this Deed of Trust may be sold at the same sale as the
Real Property or in one or more separate sales. Beneficiary
may require a deposit in the amount of ten percent (10%) of
the unpaid principal indebtedness then secured hereby or One
Hundred Thousand Dollars ($100,000.00), whichever is
greater, to accompany each bid at foreclosure sale or sale
in lieu thereof. Any such public sale may be adjourned to
another time and place by Beneficiary by announcement at the
time and place originally appointed for such sale, without
further notice or publication. Upon compliance with the
terms of the sale, Beneficiary shall convey by trustee's
deed, to and at the cost of the purchaser, the Property so
sold, free and clear from all estate, right, title or
interest of Grantor at law or in equity. The purchaser
shall have no responsibility to see to the application of
the purchase money. The proceeds of the sale shall be
applied in the following order of priority: (i) to pay all
expenses of the sale (including reasonable attorneys' fees
and disbursements and a commission to Trustee(s) of not more
than five percent (5%) of the bid price ), (ii) to pay all
accrued Impositions and receivership costs, and to reimburse
the Beneficiary and for amounts advanced to protect the lien
and the Property from the effect of any Default, or to
enforce the Loan Documents, with interest at the Default
Rate, (iii) to amounts owed under the Notes, and (iv) to
satisfy any debts secured by liens inferior to the lien of
this Deed of Trust. Any surplus shall be paid to Grantor,
or to any other person lawfully entitled to receive it, upon
the surrender and delivery to the purchaser of possession of
the Property sold and conveyed, less any expense of
obtaining possession. If all or part of the Property is
advertised for sale under the provisions of this Deed of
Trust but is not sold, Grantor will pay all expenses of and
attending such advertisement and intended sale, including
reasonable attorneys' fees, expenses and a Trustee's
commission of not more than two percent (2%) of the
Indebtedness then due, and the payment of these expenses
shall be secured by this Deed of Trust.
Beneficiary or any of its affiliates may purchase all or
part of the Property at any public or judicial sale without
forfeiting its right to collect any deficiency from Grantor
in respect of Recourse Obligations, and Beneficiary may
"credit bid" all or part of the Indebtedness at the sale.
Beneficiary, upon any such purchase, shall acquire good
title to the properties so purchased, free of the lien of
this Deed of Trust, free of all rights of redemption in
Grantor and free of all liens and encumbrances subordinate
to this Deed of Trust.
20. WAIVERS
To the maximum extent permitted by law, Grantor irrevocably
and unconditionally WAIVES and RELEASES any present or
future rights (a) of redemption (b) that may exempt the
Property from any civil process, (c) to appraisal or
valuation of the Property, (d) to extension of time for
payment, (e) that may subject Beneficiary's exercise of its
remedies to the administration of any decedent's estate or
to any partition or liquidation action, (f) to any homestead
exemption and (g) that in any way would delay or defeat the
right of Beneficiary to cause the sale of the Real Property
for the purpose of satisfying the Indebtedness. Grantor
agrees that the price paid at a lawful foreclosure sale,
whether by Beneficiary or by a third party, and whether paid
through cancellation of all or a portion of the Indebtedness
or in cash, shall conclusively establish the value of the
Real Property.
21. EXCULPATION CLAUSE AND RECOURSE ("CARVEOUT") OBLIGATIONS
Beneficiary agrees that it shall not seek to enforce any
monetary judgment against Grantor except through recourse to
the Property and any other property now or hereafter
securing all or any part of the Indebtedness, unless the
obligation from which the judgment arises is a Recourse
Obligation. Recourse Obligations include Beneficiary's
costs, expenses (including reasonable attorneys' fees),
losses and actual damages caused by (i) waste, not including
ordinary wear and tear, unless Grantor fails to maintain
Real Property with ordinary care; (ii) fraud or written
material misrepresentation by Grantor; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
the Beneficiary of condemnation proceeds because a lease of
the Real Property grants a tenant the right to a portion of
the owner's award (unless that portion is specifically
allocated to the tenant's interest by the condemning
authority); (v) failure while in monetary default to pay to
Beneficiary all rents, income and profits, net of reasonable
and customary operating expenses; (vi) failure to perform
under the environmental covenants or indemnifications set
forth in the Loan Documents; (vii) destruction or removal
from the Real Property of fixtures or personal property
securing the Loan, unless replaced by items of equal value;
(viii) terminating, amending or entering into a lease of the
Real Property in violation of the Loan Documents; (ix)
willful or grossly negligent violation of applicable law; or
(x) collection of the Loan, including the costs of
enforcement of the Loan Documents after the Notes mature by
acceleration or lapse of time. Grantor may also assume
recourse liability under Loan Documents or other agreements
that expressly provide for such personal liability, and such
Loan Documents or agreements, if any, shall not be subject
to the exculpation from personal liability set forth in this
Paragraph.
In addition, the Grantor shall have personal liability for
the entire indebtedness if the Grantor (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into the
Beneficiary's choice of either an agreement to permit an
uncontested foreclosure or an agreement to deliver a deed in
lieu of foreclosure, within sixty days of Beneficiary's
acceptance of the offer. Following Beneficiary's acceptance
of such an offer, default by the Grantor shall trigger
personal liability for the entire indebtedness. No such
offer shall be conditioned on any payment by the
Beneficiary, on the release of any obligor from any recourse
obligation, or on any other concession.
22. SECURITY AGREEMENT AND FIXTURE FILING
22.1 Security Agreement
This Deed of Trust shall be self-operative and shall
constitute a Security Agreement pursuant to the
provisions of the Maryland Uniform Commercial Code (the
"Code") with respect to those items comprising Property
that may be subject to a security interest under the
Code. Grantor, as debtor, hereby grants Beneficiary,
as secured party, a security interest in those items
and in all related additions, replacements,
substitutions and proceeds, for the purpose of securing
the Indebtedness. Grantor hereby agrees to execute and
deliver on demand, and irrevocably constitutes and
appoints Beneficiary the attorney-in-fact of Grantor,
to execute, deliver and, if appropriate, to file with
the appropriate filing officer or office, such security
agreements, financing statements or other instruments
as Beneficiary may require in order to create, perfect,
or continue this security interest. Grantor shall pay
all related filing fees and costs, all reasonable costs
and expenses of any record searches (or their
continuations), as Beneficiary may reasonably require.
Without the prior written consent of Beneficiary,
Grantor shall not create or suffer the creation of any
other lien on or security interest in any of the
Property subject to the security interest. Upon
Default, Beneficiary shall have the rights and remedies
of a secured party under the Code as well as all other
rights and remedies available at law or in equity, and,
at Beneficiary's option, Beneficiary may also invoke
the remedies provided elsewhere in this Deed of Trust
as to such property. Grantor and Beneficiary agree
that the rights granted to Beneficiary as secured party
under this Section 21 are in addition to rather than a
limitation on any of Beneficiary's other rights under
this Deed of Trust with respect to the Personal
Property. No failure to mention any item in a
financing statement shall limit the scope of Grantor's
assignment of any Property, impair the priority of
Beneficiary`s lien on any Personal Property, or alter
Beneficiary's rights to Insurance Proceeds and
Condemnation Proceeds, except to the extent that a
court holds that mention of the item in the Code
records was required in order for Beneficiary's
interest to enjoy priority over the interests of third
parties.
22.2 Fixture Filing
This Deed of Trust constitutes a financing statement
filed as a fixture filing in the Official Records of
the County Recorder of Anne Arundel County, Maryland
with respect to any and all fixtures comprising
Property. The "debtor" is AIP Properties #3, L.P., a
limited partnership organized under Delaware law, the
"secured party" is Life Investors Insurance Company of
America, a corporation organized under the laws of
Iowa, the collateral is as described in Section 22.1
above and the granting clauses in this Deed of Trust,
and the addresses of the debtor and secured party are
the addresses stated in Subsection 25.10 of this Deed
of Trust for notices to such parties.
23. ENVIRONMENTAL MATTERS
23.1 Representations
The Grantor represents as follows:
(a) No Hazardous Substances
To the best of Grantor's knowledge following due
inquiry as a duly diligent property owner, and
except as disclosed in the ESA, the Real Property
has been, and is, free of contamination from
Hazardous Substances, and no Hazardous Substances
have been released on or about the Real Property.
(b) Compliance with Environmental Laws
The Real Property and its current use and
presently contemplated uses comply with all
Environmental Laws and, in connection with the
ownership, operation and use of the Real Property,
all necessary permits, licenses, authorizations,
and other consents and approvals have been
obtained, and all necessary notices, publications,
and filings have been made and given, with respect
to the storage, use, and disposal of any Hazardous
Substances in, on, or about the Real Property.
(c) No Actions or Proceedings
There is no present or, to the best of Grantor's
knowledge following due inquiry as a duly diligent
property owner, no past or threatened action,
proceeding or investigation by any governmental
authority or agency related to any suspected or
actual violation of any Environmental Law with
respect to, or the presence of any Hazardous
Material on, the Real Property.
23.2 Covenants
Grantor covenants as follows:
(a) Compliance with Environmental Laws
Grantor shall, and Grantor shall cause all
employees, agents, contractors, and tenants of
Grantor and any other persons present on or
occupying the Real Property, to keep and maintain
the Real Property in compliance with all
Environmental Laws.
(b) Notices, Actions and Claims
The Grantor shall immediately advise Beneficiary
in writing of (i) any notices from any
governmental or quasi-governmental agency or
authority of violation or potential violation of
any Environmental Law received by Grantor, (ii)
any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted,
completed or threatened pursuant to any
Environmental Law, (iii) all claims made or
threatened by any third party against Grantor or
the Real Property relating to damage,
contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Substances,
and (iv) discovery by Grantor of any occurrence or
condition on any real property adjoining or in the
vicinity of the Real Property that could cause the
Real Property to become contaminated by or with
Hazardous Substances.
23.3 Beneficiary's Right to Control Claims
Beneficiary shall have the right (but not the
obligation) to join and participate in, as a party if
it so elects, any legal proceedings or actions
initiated in connection with any Hazardous Substances
and to have its related and reasonable attorneys' and
consultants' fees paid by Grantor upon demand.
23.4 Indemnification
Grantor shall be solely responsible for, and shall
indemnify, defend, and hold harmless Beneficiary,
Trustees, and their respective directors, officers,
employees, agents, successors and assigns from and
against, any loss, damage, cost, expense or liability
of whatever kind or nature, known or unknown,
contingent or otherwise, directly or indirectly arising
out of or attributable to the use, generation, storage,
release, threatened release, discharge, disposal, or
presence (whether prior to or after the date of this
Deed of Trust) of Hazardous Substances on, in, under or
about the Real Property (whether by Grantor, a
predecessor in title, any tenant, or any employees,
agents, contractor or subcontractors of any of the
foregoing or any third persons at any time occupying or
present on the Real Property), including, without
limitation: (i) personal injury; (ii) death; (iii)
damage to property; (iv) all consequential damages; (v)
the cost of any required or necessary repair, cleanup
or detoxification of the Real Property, including the
soil and ground water thereof, and the preparation and
implementation of any closure, remedial or other
required plans; (vi) damage to any natural resources;
and (vii) all reasonable costs and expenses incurred by
Beneficiary or Trustee in connection with clauses (i)
through (vi), including but not limited to reasonable
attorneys' and consultants' fees; provided, however,
that nothing contained in this Section shall be deemed
to preclude Grantor from seeking indemnification from,
or otherwise proceeding against, any third party
including, without limitation, any tenant or
predecessor in title to the Real Property. The
covenants, agreements, and indemnities set forth in
this Section shall be binding upon Grantor and its
heirs, successors and assigns, and shall survive
repayment of the Indebtedness, foreclosure of the
Security, and Grantor's granting of a deed in lieu of
foreclosure of the Security. Any costs or expenses
incurred by Beneficiary or Trustee for which Grantor is
responsible or for which Grantor has indemnified
Beneficiary shall be paid to Beneficiary on demand,
with interest at the Default Rate from the date
incurred by Beneficiary until paid in full, and shall
be secured by this Deed of Trust. Without the prior
written consent of Beneficiary, Grantor shall not enter
into any settlement agreement, consent decree, or other
compromise in respect to any claims relating to
Hazardous Substances.
23.5 Environmental Audits
At such times as Beneficiary reasonably determines that
an environmental audit of the Real Property for the
presence of Hazardous Substances is necessary in order
to determine whether the value of the Real Property has
been or may in the future be impaired by the presence
of Hazardous Substances on, about or under the Real
Property (but no more often than annually unless
Beneficiary has reason to believe that Hazardous
Substances may be present), Grantor shall retain, upon
request of Beneficiary, or Beneficiary may retain
directly, at the sole cost and expense of Grantor, a
licensed geologist, industrial hygienist or an
environmental consultant (the "Environmental
Consultant") acceptable to Beneficiary to conduct an
environmental audit of the Real Property. Grantor
shall afford any person conducting an environmental
audit access to the Real Property and all materials
reasonably requested in connection with the
environmental audit. In light of the possible passage
of title to Beneficiary as a result of Default, any
requirement of an environmental audit by Beneficiary
shall be deemed reasonable if a Default exists. Such a
requirement shall also be deemed reasonable if
Beneficiary has received notice of the likely existence
of Hazardous Substances on, about or under the Real
Property. Grantor shall pay the actual and reasonable
cost and expenses of any environmental audit obtained
by Beneficiary within five days of written demand.
Grantor shall at Beneficiary's request comply, at its
sole cost and expense in the most commercially
reasonable manner determined by Grantor, with all
recommendations contained in the environmental audit
required to bring the Real Property into compliance
with all Environmental Laws, or for additional testing
and studies to further determine the location, quantity
and types of Hazardous Substances detected by an
environmental audit.
24. CONCERNING THE TRUSTEE
24.1 No Liability
Trustee will not be liable for any error of judgment or
act, or be otherwise responsible or accountable under
any circumstances. If the Trustee or anyone acting by
virtue of Trustee's powers enters the Real Property,
the Trustee will not be personally liable for debts
contracted or for liability or damages incurred in the
management or operation of the Real Property. Trustee
will have the right to rely on any instrument, document
or signature authorizing or supporting any action taken
or proposed to be taken by Trustee or believed by
Trustee in good faith to be genuine. Trustee will be
entitled to reimbursement for expenses incurred by
Trustee in the performance of Trustee's duties and to
reasonable compensation for services rendered. Grantor
shall, from time to time, pay compensation due Trustee
under this Deed of Trust and reimburse Trustee for and
save and hold Trustee harmless from and against any and
all loss, cost, liability, damage and expense
whatsoever incurred by Trustee in the performance of
Trustee's duties.
24.2 Retention of Money
All money received by Trustee must, until used or
applied, be held in trust for the purposes for which it
was received, but need not be segregated in any manner
from any other money (except to the extent required by
law) and Trustee will have no liability for interest on
any money received.
24.3 Successor Trustees
Trustee may resign by giving of notice of such
resignation in writing to Beneficiary. If Trustee
dies, resigns or becomes disqualified from acting in
the execution of this Trust or fails or refuses to
exercise the same when requested by Beneficiary so to
do or if for any reason and without cause Beneficiary
prefers to appoint a substitute trustee to act instead
of the original Trustee, or any prior successor or
substitute trustee, Beneficiary will have full power to
appoint a substitute trustee and, if preferred, several
substitute trustees in succession who shall succeed to
all the estates, rights, powers and duties of the
Trustee.
24.4 Succession Instruments
Any new Trustee appointed will, without any further
act, deed or conveyance, become vested with all the
estates, properties, rights, powers and trusts of
Trustee's predecessor. Upon the written request of
Beneficiary or of any successor trustee, Trustee
ceasing to act shall execute and deliver an instrument
transferring to such successor trustee all the estates,
properties, rights, powers and trusts of Trustee so
ceasing to act, and shall duly assign, transfer and
deliver any of the property and money held by Trustee
to the successor trustee so appointed in Trustee's
place.
24.5 Performance of Duties by Agents
Trustee may authorize one or more parties to act on
Trustee's behalf to perform Trustee's ministerial
functions, including, without limitation, the
transmittal and posting of any notices.
25. MISCELLANEOUS
25.1 Survival of Obligations
Each and all of the Obligations shall survive the
execution and delivery of the Loan Documents and will
continue in full force and effect until the
Indebtedness and the Obligations have been paid and
satisfied in full.
25.2 Further Assurances
Grantor, upon the request of Beneficiary or Trustee,
shall complete, execute, acknowledge, deliver and
record or file such further instruments and do such
further acts as may be necessary, desirable or proper
to carry out more effectively the purposes of this Deed
of Trust, to subject any property intended to be
covered by this Deed of Trust to the liens and security
interests it creates, to place third parties on notice
of those liens and security interests, or to correct
any defects which may be found in any Loan Document.
Grantor irrevocably appoints Beneficiary as its agent
to complete, execute, deliver and record or file all
such instruments.
25.3 Recording and Filing
Grantor shall cause this Deed of Trust and all
amendments, supplements, and substitutions to be
recorded, filed, re-recorded and refiled in such manner
and in such places as Beneficiary may reasonably
request. Grantor and will pay all recording filing, re-
recording and refiling taxes, fees and other charges.
25.4 No Waiver
No deliberate or unintentional failure by Beneficiary
to require strict performance by Grantor of any
Obligation shall be deemed a waiver, and Beneficiary
shall have the right at any time to require strict
performance by Grantor of any Obligation.
25.5 Expenses
Grantor shall pay all filing and recording fees, and
all expenses incident to the execution and
acknowledgment of this Deed of Trust, any supplements
or amendments, and any instrument entered into under
Subsection 25.2. Grantor shall pay or reimburse
Beneficiary, upon demand, for all costs and expenses,
including appraisal and reappraisal costs of the
Property and reasonable attorneys' and legal
assistants' fees, which Beneficiary may incur in
connection with enforcement proceedings hereunder, and
reasonable attorneys' and legal assistants' fees
incurred by Beneficiary in any other suit, action,
legal proceeding or dispute of any kind in which
Beneficiary is made a party or appears as party
plaintiff or defendant, affecting the Indebtedness,
this Deed of Trust, or the Property, or required to
protect or sustain the lien of this Deed of Trust.
Grantor shall be obligated to pay (or to reimburse
Beneficiary) for such fees, costs and expenses and
shall indemnify and hold Beneficiary and Trustee
harmless from and against any and all loss, cost,
expense, liability, damage and claims and causes of
action, including reasonable attorneys' fees, incurred
or accruing by reason of Grantor's failure to promptly
repay any such fees, costs and expenses.
25.6 Covenants Running with the Land
All Obligations are intended by the parties to be and
shall be construed as covenants running with the Land.
25.7 Successors and Assigns
All of the terms of the Loan Documents shall apply to,
be binding upon and inure to the benefit of the
successors and assigns of the parties.
25.8 Severability
The Loan Documents are intended to be performed in
accordance with, and only to the extent permitted by,
all applicable Legal Requirements. Any provision of
the Loan Documents that is prohibited or unenforceable
in any jurisdiction shall nevertheless be construed and
given effect to the extent possible. The invalidity or
unenforceability of any provision in a particular
jurisdiction shall neither invalidate nor render
unenforceable any other provision of the Loan Document
in that jurisdiction, and shall not affect the validity
or enforceability of that provision in any other
jurisdiction. If a provision is held to be invalid or
unenforceable as to a particular person or under a
particular circumstance, it shall nevertheless be
presumed valid and enforceable as to others, or under
other circumstances.
25.9 Usury
The parties intend that no provision of the Notes or
the Loan Documents be interpreted, construed, applied,
or enforced so as to permit or require the payment or
collection of interest in excess of the highest rate of
interest (the "Maximum Permitted Rate") permitted to be
paid or collected by applicable law with respect to
this transaction. In this regard, Grantor and
Beneficiary each stipulate and agree that it is their
common and overriding intent to contract in strict
compliance with applicable usury laws. Accordingly,
none of the terms of this Deed of Trust, the Notes or
any of the other Loan Documents shall ever be construed
to create a contract to pay, as consideration for the
use, forbearance or detention of money, interest at a
rate in excess of the Maximum Permitted Rate. Grantor
shall never be liable for interest in excess of the
Maximum Permitted Rate. Therefore, (a) in the event
that the Indebtedness and Obligations are prepaid or
the maturity of the Indebtedness and Obligations is
accelerated by reason of an election by Beneficiary,
unearned interest shall be canceled and, if theretofore
paid, shall either be refunded to Grantor or credited
on the Indebtedness evidenced by the Notes, as
Beneficiary may elect; (b) the aggregate of all
interest and other charges constituting interest under
applicable laws and contracted for, chargeable or
receivable under the Notes and the other Loan Documents
or otherwise in connection with the transaction
contemplated thereby shall never exceed the maximum
amount of interest, nor produce a rate in excess of the
Maximum Permitted Rate and (c) if any excess interest
is provided for, it shall be deemed a mistake, and the
same shall, at the option of the holder of the Notes,
either be refunded to Grantor or credited on the unpaid
principal amount (if any), and the Indebtedness
evidenced by the Notes shall be automatically reformed
so as to permit only the collection of the interest at
the Maximum Permitted Rate. Furthermore, if any
provision of the Notes or any of the other Loan
Documents is interpreted, construed, applied, or
enforced, in such a manner as to provide for interest
in excess of the Maximum Permitted Rate, then the
parties intend that such provision automatically shall
be deemed reformed nunc pro tunc so as to require
payment only of interest at the Maximum Permitted Rate.
If, for any reason whatsoever, interest paid or
received during the full term of the applicable
indebtedness produces a rate which exceeds the Maximum
Permitted Rate, then the amount of such excess shall be
deemed credited nunc pro tunc in reduction of the then
outstanding principal amount of the Indebtedness,
together with interest at such Maximum Permitted Rate.
Beneficiary shall credit against the principal of such
Indebtedness (or, if such Indebtedness shall have been
paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be
necessary to cause the interest paid to produce a rate
equal to the Maximum Permitted Rate. All sums paid or
agreed to be paid to Beneficiary for the use,
forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full
term of the applicable indebtedness, so that the
interest rate is uniform throughout the full term of
such indebtedness. In connection with all calculations
to determine the Maximum Permitted Rate, the parties
intend that all charges be excluded to the extent they
are properly excludable under applicable usury laws, as
they from time to time are determined to apply to this
transaction. The provisions of this Section shall
control all agreements, whether now or hereafter
existing and whether written or oral, between Grantor
and Beneficiary.
25.10 Entire Agreement.
The Loan Documents contain the entire agreements
between the parties relating to the financing of the
Real Property, and all prior agreements which are not
contained in the Loan Documents, other than in any
Environmental Agreement, are terminated. The Loan
Documents represent the final agreement between the
parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements
of the parties. There are no unwritten oral agreements
between the parties.
The Loan Documents may be amended, revised, waived,
discharged, released or terminated only by a written
instrument or instruments executed by the party against
which enforcement of the amendment, revision, waiver,
discharge, release or termination is asserted. Any
alleged amendment, revision, waiver, discharge, release
or termination that is not so documented shall be null
and void.
25.11 Notices.
All notices demands, consents, approvals and other
communications given pursuant to this Deed of Trust
must be in writing and must be sent by hand, or by
telecopy (with a duplicate copy sent by ordinary mail,
postage prepaid), or by postage prepaid, certified or
registered mail, return receipt requested, or by
reputable overnight courier service, postage prepaid,
addressed to the party to be notified as set forth
below:
if to Beneficiary:
Life Investors Insurance Company of America
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5223
Attn. Mortgage Loan Department
Telecopy Number: (319) 369-2188
if to Grantor:
AIP Properties #3, L.P.
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
Attn: David B. Warner
Telecopy Number: (972) 550-6037
Notices will be deemed given when delivered to
Beneficiary or to Grantor, as applicable (regardless of
whether delivered to the persons stated above to
receive copies), by hand or when a legible copy is
received by telecopier (provided receipt is verified by
telephone confirmation or one of the other permitted
means of giving Notices under this Subsection), or if
mailed, three (3) days after mailing (or on the date of
delivery for overnight courier service), with failure
to accept delivery constituting delivery for this
purpose. The parties agree to use reasonable efforts
to provide the copies of Notices required above, but
delivery of such copies shall not be required for
effective delivery of Notice. Actual notice, however
and from whomever given or received, will always be
effective Notice when received. Beneficiary may change
its address for Notices set forth above by giving at
least ten (10) days' prior Notice of such change in
writing to Grantor. Grantor may change the addresses
for Notices set forth above by giving at least thirty
(30) days' prior Notice of such change in writing to
Beneficiary.
25.12 Counterparts.
This Deed of Trust may be executed in any number of
counterparts, each of which shall be an original, but
all of which together shall constitute but one
instrument.
25.13 Applicable Law.
This Deed of Trust will be interpreted, construed,
applied, and enforced according to, and will be
governed by, the laws of the State of Maryland, without
regard to any choice of law principles which, but for
this provision, would require the application of the
law of another jurisdiction and regardless of where
executed or delivered, where payable or paid, where any
cause of action accrues in connection with this
transaction, where any action or other proceeding
involving this Deed of Trust is instituted or pending,
or whether the laws of the State of Maryland otherwise
would apply the laws of another jurisdiction.
25.14 Headings and General Application.
The section, subsection, and paragraph headings of this
Deed of Trust are provided for convenience of reference
only and shall in no way affect, modify or define, or
be used in construing, the text of the sections ,
subsections or paragraphs. If the text requires, words
used in the singular shall be read as including the
plural, and pronouns of any gender shall include all
genders.
25.15 Sole Benefit.
This Deed of Trust and the other Loan Documents have
been executed for the sole benefit of Grantor and
Beneficiary and the successors and assigns of
Beneficiary. No other party shall have rights
thereunder or be entitled to assume that the parties
thereto will insist upon strict performance of their
mutual obligations hereunder, any of which may be
waived from time to time. Grantor shall have no right
to assign any of its rights under the Loan Documents to
any party whatsoever.
25.16 Subrogation.
If any or all of the proceeds of the Indebtedness or
Obligations have been used to extinguish, extend or
renew any indebtedness heretofore existing against the
Property or to satisfy any indebtedness or obligation
secured by a lien or encumbrance of any kind (including
liens securing the payment of any Impositions), such
proceeds have been advanced by Beneficiary at Grantor's
request, and to the extent of such funds so used, the
Indebtedness and Obligations in this Deed of Trust
shall be subrogated to and extend to all of the rights,
claims, liens, titles and interests heretofore existing
against the Property pursuant thereto to secure the
indebtedness or obligation so extinguished, paid,
extended or renewed, and the rights, claims, liens,
titles and interests of Beneficiary pursuant thereto,
shall not be waived but rather shall be continued in
full force and effect and in favor of Beneficiary and
shall be merged with the lien and security interest
created herein as cumulative security for the repayment
of the Indebtedness and satisfaction of the
Obligations.
25.17 Release of Claims.
Grantor hereby RELEASES, DISCHARGES and ACQUITS forever
Beneficiary and Trustee and their officers, directors,
trustees, agents, employees and counsel (in each case,
past, present or future) from any and all Claims
existing as of the date hereof (or the date of actual
execution hereof by Grantor, if later). As used
herein, the term "Claim" shall mean any and all
liabilities, claims, defenses, demands, actions, causes
of action, judgments, deficiencies, interest, liens,
costs or expenses (including court costs, penalties,
attorneys' fees and disbursements, and amounts paid in
settlement) of any kind and character whatsoever,
including claims for usury, breach of contract, breach
of commitment, negligent misrepresentation or failure
to act in good faith, in each case whether now known or
unknown, suspected or unsuspected, asserted or
unasserted or primary or contingent, and whether
arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of
laws or regulations or otherwise.
25.18 No Partnership.
Nothing contained in the Loan Documents is intended to
create any partnership, joint venture or association
between Grantor and Beneficiary, or in any way make
Beneficiary a co-principal with Grantor with reference
to the Property.
25.19 Payoff Procedures
If Grantor pays or causes to be paid to Beneficiary all
of the Indebtedness, then the Trustee's interest in the
Real Property shall cease, and upon receipt by
Beneficiary of such payment, Beneficiary shall either
(a) assign the Loan Documents and endorse the Notes (in
either case without recourse or warranty of any kind)
to a takeout lender, upon payment of an administrative
fee of $750, or (b) release this Deed of Trust.
IN WITNESS WHEREOF, Grantor has executed and delivered this
Deed of Trust as of the date first set forth above.
AIP PROPERTIES #3, L.P.,
a Delaware limited
partnership
By AIP Properties #3 GP,
Inc.,
a Texas corporation,
its General Partner
By
________________[SEAL]
David B. Warner
Vice President
STATE OF )
) SS.
COUNTY OF )
I HEREBY CERTIFY that on this ___ day of November,
1996, before me, _____________________________, a Notary Public
in and for the State and County aforesaid, personally appeared
David B. Warner, who acknowledged himself to be Vice President of
AIP Properties #3 GP, Inc., a corporation organized under the
laws of Delaware and the General Partner of AIP Properties #3,
L.P., a limited partnership organized under the laws of Delaware,
and that, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name
of the limited partnership by himself as such Vice President of
AIP Properties #3 GP, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
_________________________________
Notary Public
My Commission Expires:
(NOTARIAL SEAL)
ATTORNEY'S CERTIFICATION
I HEREBY CERTIFY that the foregoing document was
prepared by or under the supervision of the undersigned, an
attorney duly licensed to practice before the Court of Appeals of
Maryland.
_________________________________
, Attorney
EXHIBIT A
EXHIBIT B
AIP Industrial Portfolio
Patapsco Industrial Center
Anne Arundel County, Maryland
AEGON Loan No. 87489
$3,112,500 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $3,112,500, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$26,318.35. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when Borrower shall pay its
entire principal balance, together with all accrued
interest and any other amounts owed by Borrower under
the Loan Documents. The term "Loan Documents" means
all documents entered into now or in the future in
connection with the $27,990,000 loan (the "Loan") made
by Lender to Borrower pursuant to that certain Loan
Agreement of even date herewith, by and among Borrower,
Lender, and American Industrial Properties REIT (the
"Loan Agreement"), including the Loan Agreement, this
Note, the other notes evidencing Borrower's obligation
to repay the Loan as provided in the Loan Agreement
(this Note and such other Notes sometimes collectively
referred to herein as the "Notes"), and the Deeds of
Trust, as hereinafter defined in Section 11, exclusive,
however, of the Environmental Indemnity Agreements of
even date herewith executed by Borrower and the
Indemnity Agreements of even date herewith executed by
American Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGMENT
Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, Borrower shall pay all accrued interest on the
principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, Borrower shall pay a prepayment premium equal
to the greater of (a) one percent of the prepayment amount
and (b) an amount that the parties agree will compensate
Lender for the loss of its bargained-for investment (the
"Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of Borrower to pay the indebtedness evidenced by
this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, Borrower shall have personal liability for the
entire indebtedness if Borrower (a) voluntarily transfers or
encumbers the Property in violation of the Loan Documents,
or (b) files a voluntary petition for reorganization under
the Bankruptcy Code and has not offered, prior to the
filing, to enter into Lender's choice of either an agreement
to permit an uncontested foreclosure or an agreement to
deliver a deed in lieu of foreclosure, within sixty (60)
days of Lender's acceptance of the offer. Following
Lender's acceptance of such an offer, default by Borrower
shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
Borrower waives demand, presentment for payment, protest,
notice of protest, dishonor and of nonpayment and any and
all lack of diligence or delays in collection or enforcement
of this Note. Without affecting the liability of Borrower
under this Note, Lender may release any of the Property,
grant any indulgence, forbearance or extension of time for
payment, or release any other person now or in the future
liable for the payment or performance of any obligation
under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A)
UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B) ARISING
FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH
THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND BORROWER AND
LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of Borrower given
to Lender by law, Lender shall have a lien upon and a right
of setoff against all money, securities, and other property
of Borrower, now or hereafter in possession of or on deposit
with Lender, whether held in a general or special account or
deposit, or safe-keeping or otherwise, and every such lien
and right of setoff may be exercised without demand upon, or
notice to Borrower. No lien or right of setoff shall be
deemed to have been waived by any act or conduct on the part
of Lender, or by any neglect to exercise such right of
setoff or to enforce such lien, or by any delay in so doing,
and every right of setoff and lien shall continue in full
force and effect until such right of setoff or lien is
specifically waived or released by an instrument in writing
executed by Lender.
18. COMMERCIAL LOAN
Borrower hereby represents and warrants to Lender that the
Loan was made for commercial or business purposes, and that
the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3 GP,
Inc.,
a Texas corporation,
its General Partner
By ___________________
[SEAL]
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., a Delaware limited partnership, to
the trustee named therein for the benefit of Lender, and
conveying the property located in Baltimore, Anne Arundel County,
Maryland, described therein pertaining to an aggregate
$27,990,000 loan made by Life Investors Insurance Company of
America. This Note and the Deed of Trust and Security Agreement
securing the same were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Woodlake Distribution Center
Bexar County, Texas
ATTENTION: COUNTY CLERK_THIS INSTRUMENT COVERS GOODS THAT ARE OR
WILL BECOME FIXTURES ON THE DESCRIBED REAL PROPERTY AND SHOULD BE
FILED FOR RECORD IN THE REAL PROPERTY RECORDS WHERE DEEDS OF
TRUST ON REAL ESTATE ARE RECORDED. THIS INSTRUMENT SHOULD ALSO
BE INDEXED AS A UNIFORM COMMERCIAL CODE FINANCING STATEMENT
COVERING GOODS THAT ARE OR WILL BECOME FIXTURES ON THE DESCRIBED
REAL PROPERTY. THE MAILING ADDRESSES, TELEPHONE NUMBERS, AND FAX
NUMBERS OF THE SECURED PARTY AND THE DEBTOR ARE WITHIN.
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
AIP Properties #3, L.P., a Delaware limited partnership
Grantor
having an office at
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
to
Frederick J. Rerko, Trustee
for the benefit of
Life Investors Insurance Company of America,
an Iowa corporation,
Beneficiary,
having an office
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Loan Amount: $27,990,000
After recording, please return to:
Gary Whittington, Esq.
AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
This Deed of Trust and Security Agreement is made and given this
___ day of November, 1996 by AIP Properties #3, L.P., a limited
partnership organized under the laws of Delaware, having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Grantor"), to Frederick J. Rerko, as Trustee, whose
mailing address is c/o Jones, Day, Reavis & Pogue, 2300 Trammell
Crow Center, 2001 Ross Avenue, Dallas, Texas 75201 ("Trustee"),
for the benefit of Life Investors Insurance Company of America,
corporation organized under the laws of Iowa having an office c/o
AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499-5223 ("Beneficiary"). The definitions of
capitalized terms used in this Deed of Trust may be found either
in Section 3 below, or through the cross-references provided in
that Section.
1. RECITALS
Under the terms of a commercial mortgage Revised Mortgage
Loan Application and Commitment dated July 18, 1996 (the
"Commitment"), AEGON USA Realty Advisors, Inc. ("AEGON"), as
agent for Beneficiary, agreed to fund a loan in an original
principal amount to be determined in accordance with
procedures described in the Commitment (the "Loan").
Beneficiary has funded the Loan in the principal amount of
$27,990,000 in accordance with the Commitment, and to
evidence the Loan Grantor has executed and delivered to
Beneficiary ten promissory notes in the aggregate amount of
$27,990,000.
The Commitment requires that the Loan be secured by certain
real property and by certain tangible and intangible
personal property.
2. GRANTING CLAUSE
To secure the repayment of the Indebtedness, and in
consideration of the sum of ten dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which
are acknowledged, Grantor grants, bargains, sells, warrants,
conveys, alienates, releases, assigns, sets over and
confirms to Trustee, in trust with the power of sale for the
benefit of Beneficiary, and to his successors and assigns
forever, the Real Property, the Leases, the Rents, the
Assigned Rights, the Condemnation Proceeds, and the
Insurance Proceeds, and grants to Beneficiary a security
interest in the Personal Property.
3. DEFINED TERMS
Appurtenant Easements
means the declarations, easements, covenants,
restrictions and agreements, if any, identified on
the attached Exhibit A.
Assigned Rights
means all of Grantor's rights (whether presently
existing or arising in the future) under all
contracts, claims and licenses that relate to the
Real Property and may benefit its owner, including
air rights, mineral rights, water rights, claims
against third parties for damages to the Property,
construction, roof and equipment guarantees and
warranties, building licenses and permits,
management contracts, service contracts, leases of
Fixtures or of Personal Property, and all of
Grantor's right, title and interest (whether
presently existing or arising in the future) in
and to unearned insurance premiums, any greater
estate in the Real Property, trade names, property
management files, accounting books and records,
trademarks, tradestyles, service marks,
copyrights, accounting books and records, site
plans, surveys, blueprints, and construction
drawings, plans and specifications, and the work
product of architects, environmental consultants,
property tax consultants, engineers, and any other
third party contractors whose services benefit the
Real Property.
Assignment of Leases and Rents
means the Loan Document bearing this heading.
Business Day
means any day when state and federal banks are
open for business in Cedar Rapids, Iowa.
Condemnation Proceeds
means all money or other property that has been,
or is in the future, awarded or agreed to be paid
or given in connection with any taking by eminent
domain of all or any part of the Real Property
(including a taking through the vacation of any
street dedication or through a change of grade of
such a street), either permanent or temporary, or
in connection with any purchase in lieu of such a
taking, or as a part of any related settlement.
Conditional Grace Period
means a period of thirty (30) days, except when
applicable to a failure of any term, condition, or
provision under this Deed of Trust which arises
from facts, circumstances, acts, or omissions
which are not the fault of Grantor, in which in
which case Conditional Grace Period shall mean a
period of sixty (60) days.
Default
means any of the acts, omissions, or circumstances
specified in Section 10 below.
Environmental Indemnity Agreements
means each of the documents captioned
"Environmental Indemnity Agreement" executed with
respect to the Real Property and the real property
encumbered by the Other Deeds of Trust.
Environmental Laws
means all present and future laws, statutes,
ordinances, rules, regulations, orders, and
determinations of any Governmental Authority
pertaining to health, underground storage tank
regulation or removal, protection of the
environment, natural resources, wetlands,
conservation, wildlife, waste management,
regulation of activities involving Hazardous
Substances, and pollution, or relating to waste
disposal or environmental protection with respect
to the exposure to, or manufacture, possession,
presence, use, generation, storage,
transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal,
remediation or handling of any Hazardous
Substances, including, without limitation, the
Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601
et seq., the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C.
9601(20)(D), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., the Federal
Water Pollution Control Act, as amended by the
Clean Water Act , 33 U.S.C. 1251 et seq., the
Clean Air Act , 42 U.S.C. 7401 et seq. and the
Toxic Substances Control Act, 15 U.S.C. 2601 et
seq., all as amended from time to time.
ESA
means the written environmental site assessment of
the Real Property prepared by a consultant hired
directly by Beneficiary under the terms of the
Commitment.
Escrow Expenses
means those expenses in respect of Insurance
Premiums and Impositions that Beneficiary elects
to pay directly from the Escrow Fund using moneys
accumulated through the collection of Monthly
Escrow Payments.
Escrow Fund
means the accounting entry maintained on the books
of Beneficiary as funds available for the payment
of Escrow Expenses under the terms of this Deed of
Trust.
Financing Statements
means the Uniform Commercial Code financing
statements filed to perfect the security interests
securing the Indebtedness, as amended or extended
from time to time.
Fixtures
means all materials, supplies, equipment,
apparatus and other items now or hereafter
attached to or installed on the Real Property in a
manner that causes them to become fixtures under
the law of Texas, including all built-in or
attached furniture or appliances, elevators,
escalators, heating, ventilating and air
conditioning system components, emergency
electrical generators and related fuel storage or
delivery systems, septic system components, storm
windows, doors, electrical equipment, plumbing,
water conditioning, lighting, cleaning, snow
removal, lawn, landscaping, irrigation, security,
incinerating, firefighting, sprinkler or other
fire safety equipment, bridge cranes or other
installed materials handling equipment, satellite
dishes or other telecommunication equipment, built-
in video conferencing equipment, sound systems or
other audiovisual equipment, and cable television
distribution systems. Fixtures do not include
trade fixtures, office furniture and office
equipment owned by tenants and neither necessary
nor desirable for the operation of the Real
Property as income-producing commercial real
estate.
Governmental Authority
means any political entity with the legal
authority to impose any requirement on the
Property, including the governments of the United
States, the State of Texas, and the county and
municipality in which the Property is located and
any other entity with jurisdiction to decide,
regulate, or affect the ownership, construction,
use, occupancy, possession, operation,
maintenance, alteration, repair, demolition or
reconstruction of any portion or element of the
Real Property.
Hazardous Substances
means: (A) any hazardous wastes or toxic
chemicals, materials, substances or wastes as
defined by the Environmental Laws; (B) any "oil,"
as defined by the Clean Water Act and regulations
promulgated thereunder (including crude oil or any
fraction of crude oil); (C) any substance, the
presence of which is now or in the future
prohibited, regulated or controlled by any
Environmental Law or any other law, regulation,
statute or ordinance of any Governmental
Authority; (D) any asbestos or asbestos containing
materials, (E) any polychlorinated biphenyls
("PCBs"), (E) urea formaldehyde, (F) atmospheric
radon at levels over four picocuries per cubic
liter; (G) any solid, liquid, gaseous or thermal
irritant or contaminant, such as smoke, vapor,
soot, fumes, alkalis, acids, chemicals,
pesticides, herbicides, sewage, industrial sludge
or similar wastes, and (H) any industrial, nuclear
or medical by-products. However, "Hazardous
Substances" include neither (a) immaterial
quantities of automotive motor oil leaked
inadvertently from vehicles in the ordinary course
of the operation of the Real Property and cleaned
up in accordance with reasonable property
management procedures and any applicable law nor
(b) immaterial quantities of substances
customarily and prudently used in the cleaning and
maintenance of the Real Property in accordance
with any applicable law.
Impositions
means all real and personal property taxes;
general or special assessments; ground rent;
water, gas, sewer, vault, electric or other
utility rates and charges; common charges; owners'
association dues or fees; ground rent; personal
and ad valorem property taxes; fees for any
easement, license or agreement maintained for the
benefit of the Property; and any and all other
taxes, levies, user fees, claims, charges and
assessments whatsoever that at any time may be
assessed, levied or imposed on the Property or
upon its ownership, use, occupancy or enjoyment,
and any related costs, interest or penalties.
Improvements
means all buildings and improvements of any kind
erected or placed on the Land now or in the
future, including the Fixtures, together with all
appurtenant rights, privileges, easements,
tenements, hereditaments, titles, reversions,
remainders and other interests.
Indebtedness
means all sums that are owed or become due
pursuant to the terms of the Notes, this Deed of
Trust, or any of the other Loan Documents,
including scheduled principal payments, scheduled
interest payments, default interest, late charges,
prepayment premiums, accelerated or matured
principal balances, advances, collection costs,
receivership costs, fees and costs of the Trustee
and all other financial obligations of Grantor
incurred in connection with the Loan transaction.
Indemnity Agreements
means each of the documents captioned "Indemnity
Agreement" executed by American Industrial
Properties REIT of even date herewith.
Insurance Premiums
means all premiums or other charges required to
maintain in force any and all insurance policies
that this Deed of Trust requires that Grantor
maintain.
Insurance Proceeds
means all proceeds of all insurance now or
hereafter carried by or payable to Grantor with
respect to the Property, or the interruption of
rents or income derived from the Property, all
unearned insurance premiums and all related claims
or demands.
Land
means the land described on the attached Exhibit
A, together with all appurtenances, including all
Grantor's right, title and interest to and in the
air space above the Land and all alley, party
wall, drainage, sewer, mineral, water, oil and
gas, vault and other rights, estates, titles,
interests, privileges, easements, tenements,
hereditaments, titles, royalties, reversions,
remainders and other interests.
Leases
means all leases, subleases, licenses,
concessions, extensions, renewals and other
agreements (whether written or oral, and whether
presently effective or made in the future) through
which Grantor grants any possessory interest in
and to, or any right to occupy or use, all or any
part of the Real Property, and any related
guaranties.
Legal Requirements
means all laws, statutes, rules, regulations,
ordinances, judicial decisions, administrative
decisions, building permits, development permits,
certificates of occupancy, or other requirements
of any Governmental Authority.
Loan Agreement
means that certain Loan Agreement of even date
herewith, by and among, Grantor, Beneficiary, and
American Industrial Properties REIT, wherein
Beneficiary agrees to make the Loan to Grantor.
Loan Documents
means all documents evidencing the Loan or
delivered in connection with the Loan (including
the Notes, this Deed of Trust, and the Other Deeds
of Trust), whether entered into at the closing of
the Loan or in the future, other than the
Environmental Indemnity Agreements and the
Indemnity Agreements, which are not Loan Documents
and are not secured hereby.
Monthly Escrow Payment
means the sum of the Monthly Imposition
Requirement, the Monthly Insurance Premium
Requirement, and the Monthly Reserve Requirement.
Monthly Imposition Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and, if future Impositions are as
yet undetermined, on a 5% annual inflation factor)
will be required to permit the timely payment of
the Impositions by Beneficiary.
Monthly Insurance Premium Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and using, if future Insurance
Premiums are as yet undetermined, a 5% inflation
factor) will be required to permit the timely
payment of the Insurance Premiums by Beneficiary.
Monthly Reserve Requirement
means the amount that Beneficiary estimates will,
over the subsequent twelve months, result in the
accumulation of a surplus in the Escrow Fund equal
to one-sixth of the sum of the Annual Imposition
Requirement and the Annual Insurance Premium
Requirement.
Note
means any one of the ten promissory notes made by
Grantor in the aggregate amount of $27,990,000,
together with all extensions and modifications.
Notes
means the ten promissory notes made by Grantor in
the aggregate amount of $27,990,000, together with
all extensions and modifications of any one or
more of them.
Notice
means a notice given in accordance with the
provisions of Subsection 25.10.
Obligations
means all of the obligations required to be
performed under the terms and conditions of any of
the Loan Documents by any person other than the
Trustee or Beneficiary.
Obligor
means Grantor or any other natural person, trust or
business organization that is liable under the
Loan Documents for the payment of any portion of
the Indebtedness, or the performance of any other
Obligation, under any circumstances.
Other Deeds of Trust
means the three other Deeds of Trust and Security
Agreements executed by Grantor of even date
herewith for the benefit of Beneficiary as
security for the Notes and encumbering, inter
alia, other real property owned by Grantor in
Texas and in the States of Maryland and
California.
Permitted Encumbrances
means the encumbrances or other matters listed on
Exhibit B.
Permitted Transfer
means a transfer specifically described in Section
11 as permitted.
Personal Property
means all materials, appliances, equipment or
items located at the Real Property now or in the
future and that may be incorporated in the Real
Property through construction, attachment, or
installation, or that are used, or are capable of
being used, in the operation of the Real Property
as commercial real estate, including (i)
appliances, equipment or items required under any
lease to be provided by Grantor to any tenant,
(ii) materials or equipment for use in the
maintenance, alteration, landscaping or repair of
the Real Property, including snow removal, lawn,
landscaping, irrigation, security, incineration,
and hazardous waste storage, monitoring, testing,
containment or abatement supplies and equipment;
(iii) electrical lights and fixtures (whether or
not permanently wired), backup generators and
related fuel storage and delivery systems, (iv)
rugs, carpeting, office furnishings, art work,
decorations, window treatments and equipment
located in any on-site leasing office, located in
any lobby, hall or other common area, or used in
connection with any "executive suites" operation,
(v) vehicles used to transport prospective tenants
or to maintain or operate the Real Property, (vi)
components of heating, ventilation and air
conditioning systems and air quality testing
equipment, (vii) spare or detached parts for
elevators, escalators or other mechanical systems,
(viii) all site or building plans and
specifications, construction records, and
architectural or engineering drawings relating to
the Real Property, (ix) sewer or septic system
components, (x) water wells, whether for purposes
of water supply or groundwater testing or
sampling, (xi) components of plumbing and water
conditioning systems, (xii) firefighting,
sprinkler or other fire safety equipment, (xiii)
central telephone switches, antennae, satellite
dishes or other telecommunication equipment, and
(xiv) video conferencing equipment, audio
equipment and cable television distribution
systems.
Property
means,the Real Property, together with the
Personal Property, the Leases, the Rents, the
Assigned Rights, the Condemnation Proceeds and the
Insurance Proceeds.
Real Property
means the Land, together with the Improvements,
the Fixtures appurtenant thereto, and all
appurtenant rights, privileges, tenements,
hereditaments, easements, or other interests that
run therewith.
Recourse Obligations
means the recourse obligations, or "carveouts,"
that are defined in the Notes and in Section 21.
Rents
means all rents, lease termination fees, proceeds
of letters of credit or other devices securing
future rental payments, revenues, income,
proceeds, royalties, profits and other benefits
paid or payable for using, leasing, licensing,
possessing, operating from or in, residing in,
selling, mining, extracting, or otherwise enjoying
the Real Property, whether presently existing or
arising in the future, to which Grantor may now or
hereafter become entitled or may demand or claim.
Threshold Number
means $250,000.
Trustee
means Frederick J. Rerko and his successors and
assigns.
4. TITLE
Grantor represents to and covenants with Beneficiary and
with its successors and assigns, that at the point in time
of the grant of the lien created by this Deed of Trust,
Grantor is well seized of good and indefeasible estate to
the Real Property, in fee simple absolute, subject to no
lien or encumbrance except the Permitted Encumbrances.
Grantor has good and merchantable title to the Personal
Property, and has the uncontestable right to grant a first
priority security interest in the Personal Property, free of
any rights of lessors or of sellers under conditional sales
contracts or other financing arrangements. Grantor warrants
this estate and title to Beneficiary and to its successors
and assigns forever, against all lawful claims and demands.
Grantor shall maintain mortgagee title insurance from a
solvent carrier, insuring Beneficiary in the amount of
1,537,500 or in such other amount agreed upon by
Beneficiary, that the Deed of Trust constitutes the first
and best lien on the Real Property. This Deed of Trust is
and shall remain a valid and enforceable first lien on the
Real Property, and if the validity or enforceability of this
first lien is attacked or called into question, Grantor
shall diligently and continuously defend it through
appropriate proceedings. Should it fail to do so,
Beneficiary may at Grantor's expense take all necessary and
proper action, including the engagement and compensation of
legal counsel, the prosecution or defense of litigation, and
the compromise or discharge of claims. Grantor shall
defend, indemnify and hold Beneficiary harmless in any suit
or proceeding brought to challenge or attack the validity,
enforceability or priority of the lien granted by this Deed
of Trust. If a prior mechanics' or materialmen's lien on
the Real Property arises by operation of statute during any
construction or repair of the Improvements, Grantor shall
either cause the lien to be discharged by paying when due
any amounts owed to such persons, or shall comply with
Section 12 of this Deed of Trust.
5. REPRESENTATIONS AND WARRANTIES
Grantor (i) represents to Beneficiary, and to its successors
and assigns, that the following statements are true as of
the date of this Deed of Trust, and (ii) warrants to
Beneficiary, and to its successors and assigns, that the
following statements shall remain true during the term of
the Loan:
5.1 Formation and Existence
Grantor is a limited partnership duly formed and
validly existing under the laws of Delaware, is duly
qualified to do business in and is in good standing
under, the laws of Texas, and has obtained all licenses
and permits and filed all statements of fictitious name
and registrations necessary for the lawful operation of
its business.
5.2 Power and Authority
Grantor has full power and authority to carry on its
business as presently conducted, to own the Property,
to execute and deliver the Loan Documents that it has
executed, and to perform its obligations under them.
5.3 Due Authorization
The Loan transaction and the performance of all of
Grantor's obligations under the Loan Documents have
been duly authorized by all requisite partnership
action, and each individual executing any Loan Document
on behalf of Grantor has been duly authorized to do so.
5.4 No Default or Violations
The execution and performance of Grantor's obligations
under the Loan Documents will not result in any breach
of, or constitute a default under, any contract,
agreement, document or other instrument to which
Grantor is a party or by which Grantor may be bound or
affected, and do not and will not violate or contravene
any law to which Grantor is subject; nor do any such
other instruments impose or contemplate any obligations
which are or will be inconsistent with the Loan
Documents.
5.5 No Further Approvals or Actions Required
No approval by, authorization of, or filing with any
federal, state or municipal or other governmental
commission, board or agency or other governmental
authority is necessary in connection with the
authorization, execution and delivery of the Loan
Documents by Grantor.
5.6 Due Execution and Delivery
Each of the Loan Documents to which Grantor is a party
has been duly executed and delivered on behalf of
Grantor.
5.7 Legal, Binding, Valid and Enforceable
Each of the Loan Documents to which Grantor is a party
constitutes the legal, valid and binding obligation of
Grantor, enforceable against Grantor in accordance with
its terms, except to the extent that its enforceability
may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights
generally or by equitable principles of general
application (whether considered in an action at law or
in equity).
5.8 Accurate Financial Information
All financial information furnished by Grantor to
Beneficiary in connection with the application for the
Loan is true, correct and complete in all material
respects and does not omit to state any fact or
circumstance necessary to make the statements in them
not misleading, and there has been no material adverse
change in the financial condition of Grantor since the
date of such financial information.
5.9 Compliance with Legal Requirements
All governmental approvals, and licenses required in
order for Grantor to conduct its business and maintain
and operate the Real Property in compliance with
applicable law are in full force and effect, and the
Real Property currently is being operated in compliance
with all applicable legal requirements in all material
respects.
5.10 Contracts and Franchises
All contracts and franchises necessary in order for
Grantor to conduct its business and operate the Real
Property in accordance with good commercial practice
are in force.
5.11 No Condemnation Proceeding
Grantor has no knowledge of any present, pending or
threatened condemnation proceeding or award affecting
the Real Property.
5.12 No Casualty
No damage to the Real Property by any fire or other
casualty has occurred and remained unrepaired.
5.13 Complete Lots and Tax Parcels
The Land is comprised exclusively of tax parcels that
are entirely included within the Land, and of
subdivision lots that are entirely included within the
Land.
6. COVENANTS
6.1 Payment and Performance
Grantor shall pay the Indebtedness and perform all of
its other obligations under the Loan Documents, as and
when the Loan Documents require such payment and
performance.
6.2 Payment of Impositions
Grantor shall pay the Impositions on or before the last
day on which they may be paid without penalty or
interest, and shall, within thirty days, furnish
Beneficiary with a paid receipt or a canceled check as
evidence of payment. If Beneficiary does not receive
such evidence, Beneficiary may secure it directly. If
it does so, Beneficiary will charge Grantor an
administrative fee of $250. This fee will be a demand
obligation under the terms of this Deed of Trust.
Grantor may meet the requirements of this Subsection by
remitting the Monthly Escrow Payments when due, by
immediately providing notice to Beneficiary of any new
Imposition or increased Imposition unknown to
Beneficiary, and by paying to Beneficiary on demand any
amount required to increase the Escrow Fund to an
amount sufficient to permit Beneficiary to pay all
Impositions from the Escrow Fund on time. If Grantor
wishes to contest the validity or amount of an
Imposition, it may do so by complying with Section 12.
If any new Legal Requirement taxes the Deed of Trust so
that the yield on the Indebtedness would be reduced,
and Grantor may lawfully pay the tax or reimburse
Beneficiary for its payment, Grantor shall do so.
6.3 Maintenance of the Real Property
Grantor shall not commit or permit any waste of the
Real Property as a physical or economic asset, and
agrees to maintain in good repair the Improvements,
including structures, roofs, mechanical systems,
parking lots or garages, and other components of the
Real Property that are necessary or desirable for the
use of the Real Property, or which Grantor as landlord
under any Lease is required to maintain for the benefit
of any tenant. In its performance of this obligation,
Grantor shall promptly and in a good and workmanlike
manner repair or restore any elements of the
Improvements that are damaged or destroyed as required
under Subsection 6.3. Grantor shall also replace
roofs, parking lots, mechanical systems, and other
elements of the Real Property requiring periodic
replacement. Grantor shall carry out such replacements
no less frequently than would any commercially
reasonable owner intending to maintain the maximum
income-generating potential of the Real Property over
its reasonable economic life. Grantor shall not,
without the prior written consent of Beneficiary,
demolish, reconfigure, or materially alter the
Improvements, but Beneficiary agrees that any request
for its consent to such an action shall be deemed given
if Beneficiary declines to respond within fifteen (15)
Business Days to any written request for such a
consent, if the request is accompanied by all materials
required to permit Beneficiary to analyze the proposed
action
6.4 Use of the Real Property
Grantor shall cause the Real Property to be used as a
service center, office, or warehouse property and for
no other purpose.
6.5 Independence of the Real Property
Grantor shall maintain the independence of the Real
Property from other land and improvements not included
within or located on the Land. In fulfilling this
covenant, Grantor shall neither take any action which
would make it necessary to own or control any property
other than the Real Property in order to meet the
obligations of the landlord under any Lease, or in
order to comply with the Legal Requirements, nor take
any action which would cause any land or improvements
other than the Land and the Improvements to rely upon
the Land or the Improvements for those purposes, nor
impair the integrity of the Land as one or more
complete subdivided lots and tax parcels.
6.6 Rebuilding upon Casualty and Remediation of Effect of
Condemnation
If a casualty occurs, Grantor shall rebuild the
Improvements. If any portion of the Real Property is
taken by power of eminent domain, Grantor shall remedy
its effects. In either case, the rebuilding or
remediation shall restore the Real Property's value and
potential to generate income in proportion to the
amount of the Indebtedness remaining after any
application of Insurance Proceeds or Condemnation
Proceeds to the Indebtedness.
6.7 Performance of Landlord Obligations
Grantor shall perform its obligations as landlord under
the Leases, and shall neither take any action, nor fail
to take any action, if the action or failure would be
inconsistent with the commercially reasonable
management of the property for the purpose of enhancing
its long-term performance and value. Grantor shall
not, without Beneficiary's written consent, extend,
modify, terminate or enter into any lease of the Real
Property, except in compliance with the Agreement
Regarding Leasing, which Beneficiary and Grantor have
entered into today, and which grants certain rights,
personally, to Grantor.
6.8 Financial reports and Operating Statements
During the term of the Loan, Grantor shall maintain
complete and accurate accounting and operational
records, including copies of all Leases and other
written contracts relating to the Real Property, copies
of all tax statements, and evidence to support the
payment of all material property-related expenses.
Within 120 days of the end of each fiscal year, Grantor
shall deliver to Beneficiary (A) copies of the
consolidated financial statements of Grantor and its
general partner, prepared by an independent certified
public accountant in accordance with generally accepted
accounting principles, consistently applied, (B) a
complete and accurate operating statement for the Real
Property, and (C) a complete rent roll (listing
tenants, unit numbers, square feet occupied and leased,
rents, delinquencies, vacancies, other income received
and expenses), all certified as true and correct by
Grantor and in form satisfactory to Beneficiary. If
Grantor fails to deliver the items required in this
Subsection, Beneficiary may engage an accounting firm
to prepare the required items. In connection with the
engagement of this firm and its supervision, Grantor
shall pay Beneficiary an administrative fee of $1,000.
Grantor shall cooperate fully with any investigative
audit required to permit the accounting firm to produce
these items, and the fees and expenses incurred in
connection with their preparation shall be paid by
Grantor on demand.
7. INSURANCE REQUIREMENTS
At all times until the Indebtedness is paid in full, Grantor
shall maintain insurance coverage and administer insurance
claims in compliance with this Section.
7.1 Required Coverages
(a) All Risk/Open Perils Special Form Property
Grantor shall maintain coverage of 100% of the
replacement cost of all insurable elements of the
Real Property all tangible Personal Property. If
a coinsurance clause is in effect, an agreed
amount endorsement is required. Blanket policies
must include limits by property location.
Coverage shall extend to the Real Property and to
all tangible Personal Property.
(b) Broad Form Boiler and Machinery
If any such item is located on or about the Real
Property, Grantor shall maintain this coverage,
including a form of business income coverage.
(c) Flood
If the Real Property is located in a special flood
hazard area according to the most current flood
insurance rate map issued by the Federal Emergency
Management Agency and if flood insurance is
available, Grantor shall maintain flood insurance
coverage of all insurable elements of Real
Property and of all tangible Personal Property.
(d) Business Interruption
Grantor shall maintain a form of business income
coverage in the amount of 80% of one year's
business income from the Property. Blanket
policies must include limits by property location.
(e) Comprehensive/general liability
Grantor shall maintain such coverage (which may be
in the form of umbrella/excess liability
insurance) with a $1,000,000 combined single limit
per occurrence and a minimum aggregate limit of
$2,000,000.
(f) Liquor liability
Grantor shall maintain such coverage, if
applicable law may impose liability on those
selling, serving, or giving alcoholic beverages to
others and if such beverages will be sold, served
or given on the Real Property by Grantor.
(g) Elective coverages
Beneficiary may require additional coverages
appropriate to the property type and site
location. Additional coverages may include
earthquake, mine subsidence, sinkhole, personal
property, supplemental liability, or coverages of
other property-specific risks.
7.2 How Beneficiary Should Be Named
On all property policies and coverages (including
coverage against loss of business income), Beneficiary
must be named as "first mortgagee" under a standard
mortgage clause. On all liability policies and
coverages, Beneficiary must be named as an "additional
insured." Beneficiary should be referred to verbatim as
follows: "Life Investors Insurance Company of America
and its successors, assigns, and affiliates; as their
interest may appear; c/o AEGON USA Realty Advisors,
Inc.; Mortgage Loan Dept.; 4333 Edgewood Rd., NE; Cedar
Rapids, Iowa 52499-5223."
7.3 Rating
Each insurance carrier must be rated A, Class XII, or
better by Best's Rating Service, without regard to its
parent's or any reinsurer's rating.
7.4 Deductible
The maximum deductible on all coverages and policies is
$25,000.
7.5 Notices, Changes and Renewals.
All policies must require the insurance carrier to give
Beneficiary a minimum of thirty (30) days notice in the
event of cancellation or non-renewal. Grantor shall
report to Beneficiary immediately any vacancy, change
of title, tenant occupancy or use, physical damage,
additional improvements or other factors affecting any
insurance contract. An original or certified copy of
each policy is required upon renewal. If no such copy
is available, Beneficiary will accept a binder for a
period not to exceed 90 days. All binders,
certificates of insurance, and original or certified
copies of policies must name Beneficiary as a named
insured, or as an additional insured, must include the
complete and accurate property address and must bear
the original signature of the issuing insurance agent.
7.6 Unearned Premiums
If this Deed of Trust is foreclosed, Beneficiary may at
its discretion cancel any of the insurance policies
required under this Section and apply any unearned
premiums to the Indebtedness.
7.7 Forced Placement
If Grantor fails to comply with the requirements of
this Section, Beneficiary may, at its discretion,
procure any required insurance. Any premiums paid for
such insurance, or the allocable portion of any premium
paid by Beneficiary under a blanket policy for such
insurance, shall be a demand obligation under this Deed
of Trust, and any unearned premiums under such
insurance shall comprise Insurance Proceeds and
therefore a portion of the Property.
8. INSURANCE AND CONDEMNATION PROCEEDS
8.1 Adjustment of Insurance Claims and Compromise of
Condemnation Awards
Grantor may settle any insurance claim or condemnation
proceeding if the effect of the casualty or the
condemnation may be remediated for $50,000 or less. If
a greater sum is required, Grantor may not settle any
such claim or proceeding without the advance written
consent of Beneficiary. If a Default exists, Grantor
may not settle any insurance claim or condemnation
proceeding without the advance written consent of
Beneficiary.
8.2 Direct Payment to Beneficiary of Proceeds
If the Insurance Proceeds received in connection with a
casualty or the Condemnation Proceeds received in
respect of a condemnation exceed $50,000, or if there
is a Default, then such proceeds shall be paid directly
to Beneficiary. Beneficiary shall have the right to
endorse instruments that evidence proceeds which it is
entitled to receive directly.
8.3 Availability to Grantor of Proceeds
Grantor shall have the right to use the Insurance
Proceeds or the Condemnation Proceeds to rebuild the
Improvements following a casualty, or the remedy the
effect on the Real Property of any condemnation, if the
amount received is less than the Threshold Number,
provided (a) no condition of Default then exists, (b)
no Default with respect to any payment obligation under
any of the Loan Documents shall have occurred during
the preceding twelve months, (c) no nonmonetary default
shall have occurred, been noticed and remained uncured
beyond the applicable cure period and (d) the proceeds
received by Beneficiary, together with any additional
funds deposited with Beneficiary by Grantor, are then
sufficient, in Beneficiary's discretion, to restore the
Improvements to their condition before the casualty, or
to remedy the effect on the Real Property of the
condemnation. Beneficiary may condition disbursements
on approval of plans and specifications, minimum
disbursement requirements, submittal of certificates of
occupancy and other appropriate evidence of completion,
updating of Beneficiary's mortgagee title insurance
coverage to insure the absence of mechanics' or
materialmen's liens, disbursement on a percentage of
completion basis with a ten percent holdback on all
disbursements pending final completion, and other
customary safeguards for construction lenders. All
transactional expenses shall be paid by Grantor. If
the amount received in respect of a casualty or
condemnation equals or exceeds the Threshold Number,
then such proceeds may, at Grantor's option, be used to
rebuild or to remedy subject to all of the provisions
and procedures described above, but only if the Loan-to-
Value ratio of the Property on completion will be 75%
or less, as determined by Beneficiary based on its
appraisal review, as determined by repeating the
appraisal procedure described in Section 4.2.1 of the
Commitment. If necessary, Grantor shall make a
prepayment of the Loan, without premium, sufficient to
achieve this Loan-to-Value ratio. The independent fee
appraisal shall be at Grantor's expense, and Grantor
shall pay Beneficiary an administrative fee of $2,500
in connection with its review. Beneficiary may require
that Grantor deposit $10,000 with Beneficiary as
security for these expenses or may pay the fee
appraiser's and administrative fees from the proceeds
at its sole discretion.
Unless Grantor has the right to use the Insurance
Proceeds or the Condemnation Proceeds under the
foregoing paragraph, Beneficiary may, in its sole and
absolute discretion, either apply them to the Loan
balance or disburse them for the purposes of repair and
reconstruction, or to remedy the effects of the
condemnation. No prepayment premium will be charged on
amounts applied to reduce the principal balance of the
Loan.
9. ESCROW FUND
Grantor shall pay the Monthly Escrow Payment on the first
day of every month, commencing January 1, 1997. Any Monthly
Escrow Payment received after the tenth day of the month in
which it is due shall be subject to a late charge of five
percent, which shall not be applied to the Escrow Fund.
Beneficiary shall hold Monthly Escrow Payments in a fund
from which Beneficiary will pay Escrow Expenses that
Beneficiary has anticipated will become payable on a regular
basis during the Loan's term, and on which Beneficiary has
based its determination of the Monthly Imposition
Requirement, the Monthly Insurance Premium Requirement and
the Monthly Reserve Requirement. The Escrow Fund will be
maintained as an accounting entry in Beneficiary's general
account, where it may be commingled with Beneficiary's other
funds. Beneficiary may reanalyze the projected Escrow
Expenses from time to time and shall advise Grantor of any
change in the amount of the Monthly Escrow Payment Grantor
hereby grants to Beneficiary a security interest in the
Escrow Fund and agrees that, upon the foreclosure of the
Deed of Trust, the delivery of a deed in lieu of
foreclosure, or the payoff of the Loan, Beneficiary may
apply amounts in the Escrow Fund, net of accrued Escrow
Expenses, to the Indebtedness. Beneficiary shall remit any
amounts in excess of the Indebtedness to Grantor.
10. DEFAULT
10.1 Existence of Default
A Default shall exist immediately upon the occurrence
of any of the acts, omissions or circumstances
specified in Subsection 10.2 or in Subsection 10.4.
Upon the occurrence of any of the acts, omissions or
circumstances specified in Subsection 10.3, Beneficiary
may deliver written Notice to Grantor of the existence
of such an act, omission or circumstance, and that such
an act, omission or circumstance shall, if uncured
within the Conditional Grace Period, constitute a
Default under the Loan Documents. A Default shall
exist if the act, omission or circumstance has not been
cured prior to expiration of the Conditional Grace
Period, or if, following such Notice, Grantor either
ceases to pursue the cure of such an act, omission or
circumstance with diligence, or repudiates its
obligation to effect such a cure.
10.2 Monetary Defaults
A monetary default shall exist upon any of the
following:
(a) Monthly Principal and Interest Payments
Grantor's failure to pay, or to cause to be paid,
any regular monthly payment of principal and
interest due under the Notes, or any required
Monthly Escrow Payment, so that Beneficiary
receives the payment on or before the tenth day of
the month in which the payment is due;
(b) Matured Indebtedness
Grantor's failure to pay, or to cause to be paid,
the Indebtedness when the Loan matures by
acceleration under Section 13, because of a
transfer or encumbrance under Section 16, or by
lapse of time;
(c) Demand Obligations
Grantor`s failure to pay, or to cause to be paid,
within five Business Days of Beneficiary's written
demand, any other amount due under this Deed of
Trust or any of the other Loan Documents;
10.3 Curable Nonmonetary Default
A curable nonmonetary default shall exist upon any of
the following:
(a) Entry of a Material Judgment
The entry of any judgment against Grantor or any
other Obligor, if the judgment may materially and
adversely affect the value, use or operation of
the Real Property;
(b) Tax Lien
The filing of any federal, state or local tax lien
against Grantor or any other Obligor, or against
the Real Property.
(c) Failure of Warranty
Any representation made in Section 5 or warranted
in any other Loan Document shall become untrue or
misleading in any material respect.
(d) Other Defaults
Grantor's failure to observe any promise or
covenant made in this Deed of Trust or any other
Loan Document, if the failure is not described in
Subsection 10.2, in Subsection 10.4, or elsewhere
in this Subsection 10.3.
10.4 Incurable Nonmonetary Default
An incurable nonmonetary default shall exist upon any
of the following:
(a) Material Untruth or Misrepresentation
Beneficiary`s discovery that any representation
made by Grantor or by any other Obligor in any
Loan Document in connection with the Loan was
untrue or misleading in any material respect at
the time it was made.
(b) Voluntary Bankruptcy Filing
The filing by Grantor or by any other Obligor of a
petition in bankruptcy or for relief from
creditors under any present or future law that
affords general protection from creditors.
(c) Involuntary Bankruptcy or Similar Filing
Grantor or any other Obligor becomes the subject
of an involuntary petition in bankruptcy or of any
other action that may result in a composition of
its debts, that may provide for the marshaling of
its assets for the satisfaction of Grantor's or
such other Obligor's debts, or that may result in
the judicially ordered sale of the its assets for
the purpose of satisfying its obligations to
creditors, unless a motion for the dismissal of
the petition or other action is filed within ten
days and results in its dismissal within sixty
days of the filing of the petition or other
action.
(d) Insolvency
An adjudication that Grantor or any other Obligor
is insolvent.
(e) Receivership
The appointment of a receiver or trustee to take
possession of any of the assets of Grantor or of
any other Obligor unless a motion for the
dismissal of the appointment is filed within ten
days and results in dismissal of the receiver or
trustee within thirty days of the filing of the
petition or other action.
(f) Levy or Attachment
The taking or seizure of any material portion of
the Property under levy of execution or attachment
unless a motion for the dismissal of the petition
or other action is filed within ten days and
results in its dismissal within ten days of the
filing of the petition or other action.
(g) Death, Dissolution or Liquidation
The dissolution or liquidation of any Obligor that
is not a natural person, or the cessation of its
legal existence shall cease, or the death of any
Obligor who is a natural person (unless the
dissolution, liquidation, cessation or death
results in a Permitted Transfer).
(h) Abandonment
Grantor's abandonment of the Real Property.
(i) Impairment of the Lien by Legal Requirement
The promulgation by any Governmental Authority of
a Legal Requirement, or a ruling by a court of
competent jurisdiction, if the effect of the Legal
Requirement or ruling is to make the payment of
the Indebtedness unlawful or usurious, to prevent
Grantor or any other Obligor from legally
performing any material obligation under any Loan
Documents, to materially impair the right of
Beneficiary to accelerate the Indebtedness upon
the occurrence of a material Default, or to
materially impair the right of Beneficiary, upon
the failure of Grantor to pay the Indebtedness at
its maturity through acceleration or lapse of
time, to cause the sale of the Real Property and
the to apply the proceeds of the sale to the
Indebtedness.
(j) Impairment of Yield through Taxation
The promulgation of any Legal Requirement that
taxes the Deed of Trust so that the yield on the
Indebtedness would be reduced, if Grantor may
neither lawfully pay the tax nor lawfully
reimburse Beneficiary for its payment.
(k) Proceeding to Contest Lien
Grantor's institution of any proceeding to contest
the validity of Beneficiary's lien on the
Property.
11. RIGHT TO CURE
Upon Default or upon the failure of Grantor, following a
notice given under Subsection 10.3, to diligently pursue the
cure of any act, omission or circumstance that may cause
Default, Beneficiary shall have the right to cure the
Default or the act, omission or circumstance. The expenses
of doing so shall be part of the Indebtedness, and Grantor
shall pay them to Beneficiary on demand.
12. CONTEST RIGHTS
Grantor may secure the right to contest Impositions and
mechanics' or materialmen's liens, through appropriate
proceedings conducted in good faith, by depositing with
Beneficiary an amount equal to 125% of the amount of the
Imposition or the lien, or by depositing a bond or other
security acceptable to Beneficiary in its sole discretion.
If the contest of the related Imposition or lien is
unsuccessful, Beneficiary shall use the amount deposited, or
the proceeds of the bond or other security, to pay the
Imposition or to satisfy the obligation from which the lien
has arisen. Any surplus shall be refunded to Grantor.
13. DUE ON TRANSFER OR ENCUMBRANCE
Except as expressly permitted by the terms of the Loan
Agreement, upon the sale of any portion of the Real
Property, or upon any other conveyance, transfer or vesting
of any direct or indirect interest in Grantor or the
Property, including (i) the direct or indirect transfer of,
or the granting of a security interest in, the ownership of
Grantor, (ii) any encumbrance (other than a Permitted
Encumbrance) of the Real Property and (iii) the granting of
any security interest in the Property, the Indebtedness
shall, at Beneficiary's option, become immediately due and
payable without notice, unless the sale, conveyance,
transfer or vesting is a Permitted Transfer.
14. PERMITTED TRANSFER
14.1 Certain Transfers of Limited Partnership Interests
Transfers of limited partnership interests in Grantor
that do not result in a loss of American Industrial
Properties REIT's majority control of Grantor shall
constitute Permitted Transfers.
14.2 Transfer to an Approved Purchaser
Grantor shall have the right, on one occasion during
the term of the Loan, to sell or transfer the Property
(together with all other real and personal property
then securing the Notes) in a transaction approved by
Beneficiary. Beneficiary agrees to approve a transfer
if the following conditions are satisfied:
(a) No Default
No Default shall exist, and no act, omission or
circumstance shall exist which, if uncured
following notice and the passage of time, would
become a Default.
(b) Request and Supporting Materials
Beneficiary shall receive a written request for
its approval at least sixty days in advance notice
of the proposed transfer. The request shall
specify the identity of the proposed transferee
and the terms of the transaction, and shall be
accompanied by the financial statements, tax
returns, and organizational documents of the
proposed transferee and its principals.
(c) Criteria to be Considered
The financial strength, credit history and
demonstrated property management expertise of the
proposed transferee and its principals shall be
satisfactory to Beneficiary in its sole
discretion. Beneficiary expressly reserves the
right to withhold its approval of the proposed
transfer if the proposed transferee or any of its
principals is or has been the subject of any
bankruptcy, insolvency, or similar proceeding.
(d) Assumption Agreement
Under the terms of the proposed transfer, the
proposed transferee shall assume the Loan, without
modification, under the terms of an assumption
agreement and additional documentation
satisfactory to Beneficiary in form and substance.
(e) Retention of Recourse Obligations
Under the terms of the assumption agreement and
additional documentation, liability for Recourse
Obligations arising after the date of the transfer
and assumption shall be assumed by the principals
of the proposed transferee, and liability for
Recourse Obligations arising before or in
connection with the transfer shall be retained by
those liable for them before the transfer.
(f) Title Insurance Endorsement
Grantor shall agree to provide an endorsement to
Beneficiary's mortgagee title insurance policy,
insuring the continued validity and priority of
the Deed of Trust following the assumption.
(g) Assumption Fee
Beneficiary shall receive an assumption fee of
1.25 percent of the outstanding balance of the
Loan at the time of the sale or transfer, and
Grantor shall agree to reimburse Beneficiary's out-
of-pocket expenses incurred in connection with the
proposed transfer, including title, recording, and
attorneys' fees, regardless of whether the
transfer is consummated.
15. NOTICE OF ASSIGNMENT OF LEASES AND RENTS
Under the Assignment of Leases and Rents, Grantor has
assigned to Beneficiary, and to its successors and assigns,
all of Grantor's right and title to, and interest in, the
Leases, including all rights under the Leases and all
benefits to be derived from them. The rights assigned
include all authority of Grantor to modify or terminate
Leases, or to exercise any remedies, and the benefits
assigned include all Rents. This assignment is present and
absolute, but under the terms of the Assignment of Leases
and Rents, Beneficiary has licensed Grantor to collect and
use the Rents, and to exercise the rights assigned in this
paragraph, in any way that is consistent with its
obligations under the Loan Documents, under its terms. This
license, however, expires upon the maturity of the Loan by
acceleration or by lapse of time. Beneficiary may terminate
the license by written notice upon either (i) Default or
(ii) the occupancy of more than one-half of the leasable
space in the Improvements by a single tenant that is the
subject of a petition under the Bankruptcy Code, that has
threatened to file such a petition, or whose insolvency is
imminent. If the license to collect rents is terminated
under clause (ii) and there is no Default, then Beneficiary
shall collect the Rent directly, apply it to that portion of
the Indebtedness then due and payable, and promptly remit
any excess amount to Grantor. Grantor shall promptly remit
to Beneficiary any Rents it receives after the expiration or
termination of Grantor's license to collect the Rents.
16. ACCELERATION
Under the terms of the Notes, if a Default exists,
Beneficiary may, at its option, without Notice to Grantor,
declare the Indebtedness to be immediately due and payable.
17. RIGHTS OF ENTRY AND TO OPERATE
17.1 Entry on Property
If a Default exists, Beneficiary may without notice
enter upon the Real Property and take exclusive
possession thereof and of all books, records and
accounts pertaining thereto, all without notice and
without being guilty of trespass. If Grantor remains
in possession of all or any part of the Property after
Default and without Beneficiary's prior written
consent, Beneficiary may, without notice to Grantor,
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
writ of restitution.
17.2 Operation of Property
If a Default exists, Beneficiary may hold, lease,
manage, operate or otherwise use or permit the use of
the Real Property, either itself or by other persons,
firms or entities, in such manner, for such time and
upon such other terms as Beneficiary may deem to be
prudent and reasonable under the circumstances (making
such repairs, alterations, additions and improvements
thereto and taking any and all other action with
reference thereto, from time to time, as Beneficiary
deems necessary or desirable), and apply all Rents and
other amounts collected by Beneficiary in accordance
with the provisions of the Assignment of Leases and
Rents.
18. RECEIVERSHIP
If a Default exists, Beneficiary may apply to a court of
competent jurisdiction for the appointment of a receiver of
all or any part of the Property, whether or not the value of
the Property exceeds the Indebtedness, whether or not waste
or deterioration of the Real Property has occurred, and
whether or not other arguments based on equity would justify
the appointment. Grantor irrevocably consents to such an
appointment. Any such receiver shall have all the rights
and powers customarily given to receivers in Texas,
including the rights and powers granted to Beneficiary by
this Deed of Trust, the power to maintain, lease and operate
the Real Property on terms approved by the court, and the
power to collect the Rents and apply them to the
Indebtedness or otherwise as the court may direct. Once
appointed, a receiver may at Beneficiary's option remain in
place until the Indebtedness has been paid in full.
19. FORECLOSURE
Upon the existence of Default, Beneficiary may immediately
proceed to foreclose the lien of this Deed of Trust against
all or part of the Real Property by foreclosure sale in
accordance with the laws of Texas.
Specifically, Beneficiary may, by and through Trustee, or
otherwise, sell or offer for sale the Property in such
portions, order and parcels as Beneficiary may determine,
with or without having first taken possession of the
Property, to the highest bidder for cash at public auction.
Beneficiary shall give legal notice of the time, place and
terms of sale by posting or causing to be posted written or
printed notice at least twenty-one (21) days before the date
of the sale. The notice shall be posted at the courthouse
door, or in another area in the courthouse designated for
such public notices. In addition, Beneficiary shall file
the notice with the County Clerk of each county in which all
or a portion of the Property may be situated. The notice
may be posted and filed by the Trustee acting, or by any
person acting for him or her. The holder of the
Indebtedness and Beneficiary of the Obligations (if
different than the holder of the Indebtedness) shall also,
at least twenty-one (21) days before the date of sale, serve
written or printed notice of the proposed sale by certified
mail on each person who, according to the records of
Beneficiary, is obligated to pay all or part of the
Indebtedness. This notice shall be enclosed in an envelope,
with postage prepaid, addressed to that person at his or her
most recent address according to the records of Beneficiary
or other holder of the Notes, and deposited in a post office
or official depository under the care and custody of the
United States Postal Service. The affidavit of any person
having knowledge of the facts to the effect that such
service was completed shall be prima facie evidence of the
fact of service. The sale will take place at the county
courthouse of Bexar County or, if the Real Property is
located in more than one county, at the county courthouse in
any of counties designated in the notices of sale provided
for in this Section. No Personal Property need be present
at the sale in order to be sold. The sale will take place
at the area of the courthouse designated from time to time
by the commissioners court (or, if not so designated, at the
courthouse door) on the first Tuesday of any month between
the hours of 10.00 a.m. and 4.00 p.m. The sale shall begin
within three (3) hours of the time designated in the notice
of sale as the earliest time at which such sale will occur.
Beneficiary may accomplish the foreclosure in any manner
permitted by Chapter 51 of the Property Code of the State of
Texas relating to the sale of real estate or by Chapter 9 of
the Texas Business and Commerce Code relating to the sale of
collateral after default by a debtor, as they may be
amended, or in any manner permitted under any successor
statute. At any sale under this Section, the Trustee need
neither physically attend nor have constructive possession
of the Property. Upon completion of the sale, Grantor shall
immediately relinquish possession of the Property to the
Trustee on demand.
Each instrument of conveyance executed by the Trustee shall
contain a general warranty of title, binding upon Grantor
and shall, to the fullest extent permitted by applicable
law, convey the Rents.
Each recital contained in any instrument of conveyance made
by Trustee will conclusively establish the truth and
accuracy of the matters recited, including, without
limitation, nonpayment of the Indebtedness, nonpayment and
nonperformance of the Obligations, advertisement and conduct
of such sale, and appointment of any successor Trustee.
Any and all prerequisites to the validity of any instrument
of conveyance will be rebuttably presumed to have been
performed.
The receipt of Trustee (or of Beneficiary) will be
sufficient discharge to the purchaser or purchasers for his
or their purchase money, and such purchaser or purchasers,
or his or their assigns or personal representatives, will
not, after paying such purchase money and receiving such
receipt of Trustee (or Beneficiary), be responsible for the
proper application of the purchase money or be in any way
answerable for its loss or misapplication.
To the fullest extent allowed by law, Grantor will be
completely and irrevocably divested of all of its right,
title, interest, claim and demand whatsoever, either at law
or in equity, in and to the property sold, and such sale
will be a perpetual bar, both at law and in equity, against
Grantor and against all other persons claiming or to claim
the property sold or to any part thereof by, through or
under Grantor; and
To the extent and under such circumstances as are permitted
by law, Beneficiary may be a purchaser at any such sale.
20. WAIVERS
To the maximum extent permitted by law, Grantor irrevocably
and unconditionally WAIVES and RELEASES any present or
future rights (a) of redemption, (b) that may exempt the
Property from any civil process, (c) to appraisal or
valuation of the Property, (d) to extension of time for
payment, (e) that may subject Beneficiary's exercise of its
remedies to the administration of any decedent's estate or
to any partition or liquidation action, (f) to any homestead
exemption and (g) that in any way would delay or defeat the
right of Beneficiary to cause the sale of the Real Property
for the purpose of satisfying the Indebtedness. Grantor
agrees that the price paid at a lawful foreclosure sale,
whether by Beneficiary or by a third party, and whether paid
through cancellation of all or a portion of the Indebtedness
or in cash, shall conclusively establish the value of the
Real Property.
Grantor expressly WAIVES and RELINQUISHES any right or
remedy which it may have or be able to assert by reason of
the provisions of Chapter 34 of the Business and Commerce
Code of the State of Texas pertaining to the rights and
remedies of sureties. To the maximum extent permitted by
applicable law, Grantor hereby WAIVES and RELEASES all
rights, remedies, claims and defenses based upon or related
to Sections 51.003, 51.004 and 51.005 of the Property Code
of the State of Texas to the extent the same pertain or may
pertain to any enforcement of this Deed of Trust.
21. EXCULPATION CLAUSE AND RECOURSE ("CARVEOUT") OBLIGATIONS
Beneficiary agrees that it shall not seek to enforce any
monetary judgment against Grantor except through recourse to
the Property and any other property now or hereafter
securing all or any part of the Indebtedness, unless the
obligation from which the judgment arises is a Recourse
Obligation. Recourse Obligations include Beneficiary's
costs, expenses (including reasonable attorneys' fees),
losses and actual damages caused by (i) waste, not including
ordinary wear and tear, unless Grantor fails to maintain the
Property with ordinary care; (ii) fraud or written material
misrepresentation; (iii) failure to pay taxes, assessments,
ground rent or any other lienable impositions as required
under the Loan Documents; (iv) misapplication of tenant
security deposits, insurance proceeds or condemnation
proceeds, or the unavailability to Beneficiary of
condemnation proceeds because a lease of the Real Property
grants a tenant the right to a portion of the owner's award
(unless that portion is specifically allocated to the
tenant's interest by the condemning authority); (v) failure
while in monetary default to pay to Beneficiary all rents,
income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Notes mature by acceleration or lapse of
time. Grantor may also assume recourse liability under Loan
Documents or other agreements that expressly provide for
such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, Grantor shall have personal liability for the
entire indebtedness if Grantor (a) voluntarily transfers or
encumbers the Property in violation of the Loan Documents,
or (b) files a voluntary petition for reorganization under
the Bankruptcy Code and has not offered, prior to the
filing, to enter into Beneficiary's choice of either an
agreement to permit an uncontested foreclosure or an
agreement to deliver a deed in lieu of foreclosure, within
sixty days of Beneficiary's acceptance of the offer.
Following Beneficiary's acceptance of such an offer, default
by Grantor shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Beneficiary, on the release of any obligor from
any recourse obligation, or on any other concession.
22. SECURITY AGREEMENT AND FIXTURE FILING
22.1 Security Agreement
This Deed of Trust shall be self-operative and shall
constitute a Security Agreement pursuant to the
provisions of the Texas Uniform Commercial Code (the
"Code") with respect to those items comprising Property
that may be subject to a security interest under the
Code. Grantor, as debtor, hereby grants Beneficiary,
as secured party, a security interest in those items
and in all related additions, replacements,
substitutions and proceeds, for the purpose of securing
the Indebtedness. Grantor hereby agrees to execute and
deliver on demand, and irrevocably constitutes and
appoints Beneficiary the attorney-in-fact of Grantor,
to execute, deliver and, if appropriate, to file with
the appropriate filing officer or office, such security
agreements, financing statements or other instruments
as Beneficiary may require in order to create, perfect,
or continue this security interest. Grantor shall pay
all related filing fees and costs, all reasonable costs
and expenses of any record searches (or their
continuations), as Beneficiary may reasonably require.
Without the prior written consent of Beneficiary,
Grantor shall not create or suffer the creation of any
other lien on or security interest in any of the
Property subject to the security interest. Upon
Default, Beneficiary shall have the rights and remedies
of a secured party under the Code as well as all other
rights and remedies available at law or in equity, and,
at Beneficiary's option, Beneficiary may also invoke
the remedies provided elsewhere in this Deed of Trust
as to such property. Grantor and Beneficiary agree
that the rights granted to Beneficiary as secured party
under this Section 21 are in addition to rather than a
limitation on any of Beneficiary's other rights under
this Deed of Trust with respect to the Personal
Property. No failure to mention any item in a
financing statement shall limit the scope of Grantor's
assignment of any Property, impair the priority of
Beneficiary`s lien on any Personal Property, or alter
Beneficiary's rights to Insurance Proceeds and
Condemnation Proceeds, except to the extent that a
court holds that mention of the item in the Code
records was required in order for Beneficiary's
interest to enjoy priority over the interests of third
parties.
22.2 Fixture Filing
This Deed of Trust constitutes a financing statement
filed as a fixture filing in the Official Records of
the County Recorder of Bexar County, Texas with respect
to any and all fixtures comprising Property. The
"debtor" is AIP Properties #3, L.P., a limited
partnership organized under Delaware law, the "secured
party" is Life Investors Insurance Company of America,
a corporation organized under the laws of Iowa, the
collateral is as described in Section 22.1 above and
the granting clauses in this Deed of Trust, and the
addresses of the debtor and secured party are the
addresses stated in Subsection 25.10 of this Deed of
Trust for notices to such parties.
23. ENVIRONMENTAL MATTERS
23.1 Representations
Grantor represents as follows:
(a) No Hazardous Substances
To the best of Grantor's knowledge following due
inquiry as a duly diligent property owner, and
except as disclosed in the ESA, the Real Property
has been, and is, free of contamination from
Hazardous Substances, and no Hazardous Substances
have been released on or about the Real Property.
(b) Compliance with Environmental Laws
The Real Property and its current use and
presently contemplated uses comply with all
Environmental Laws and, in connection with the
ownership, operation and use of the Real Property,
all necessary permits, licenses, authorizations,
and other consents and approvals have been
obtained, and all necessary notices, publications,
and filings have been made and given, with respect
to the storage, use, and disposal of any Hazardous
Substances in, on, or about the Real Property.
(c) No Actions or Proceedings
There is no present or, to the best of Grantor's
knowledge following due inquiry as a duly diligent
property owner, no past or threatened action,
proceeding or investigation by any governmental
authority or agency related to any suspected or
actual violation of any Environmental Law with
respect to, or the presence of any Hazardous
Material on, the Real Property.
23.2 Covenants
Grantor covenants as follows:
(a) Compliance with Environmental Laws
Grantor shall, and Grantor shall cause all
employees, agents, contractors, and tenants of
Grantor and any other persons present on or
occupying the Real Property, to keep and maintain
the Real Property in compliance with all
Environmental Laws.
(b) Notices, Actions and Claims
Grantor shall immediately advise Beneficiary in
writing of (i) any notices from any governmental
or quasi-governmental agency or authority of
violation or potential violation of any
Environmental Law received by Grantor, (ii) any
and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted,
completed or threatened pursuant to any
Environmental Law, (iii) all claims made or
threatened by any third party against Grantor or
the Real Property relating to damage,
contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Substances,
and (iv) discovery by Grantor of any occurrence or
condition on any real property adjoining or in the
vicinity of the Real Property that could cause the
Real Property to become contaminated by or with
Hazardous Substances.
23.3 Beneficiary's Right to Control Claims
Beneficiary shall have the right (but not the
obligation) to join and participate in, as a party if
it so elects, any legal proceedings or actions
initiated in connection with any Hazardous Substances
and to have its related and reasonable attorneys' and
consultants' fees paid by Grantor upon demand.
23.4 Indemnification
Grantor shall be solely responsible for, and shall
indemnify, defend, and hold harmless Beneficiary,
Trustees, and their respective directors, officers,
employees, agents, successors and assigns from and
against, any loss, damage, cost, expense or liability
of whatever kind or nature, known or unknown,
contingent or otherwise, directly or indirectly arising
out of or attributable to the use, generation, storage,
release, threatened release, discharge, disposal, or
presence (whether prior to or after the date of this
Deed of Trust) of Hazardous Substances on, in, under or
about the Real Property (whether by Grantor, a
predecessor in title, any tenant, or any employees,
agents, contractor or subcontractors of any of the
foregoing or any third persons at any time occupying or
present on the Real Property), including, without
limitation: (i) personal injury; (ii) death; (iii)
damage to property; (iv) all consequential damages; (v)
the cost of any required or necessary repair, cleanup
or detoxification of the Real Property, including the
soil and ground water thereof, and the preparation and
implementation of any closure, remedial or other
required plans; (vi) damage to any natural resources;
and (vii) all reasonable costs and expenses incurred by
Beneficiary or Trustee in connection with clauses (i)
through (vi), including but not limited to reasonable
attorneys' and consultants' fees; provided, however,
that nothing contained in this Section shall be deemed
to preclude Grantor from seeking indemnification from,
or otherwise proceeding against, any third party
including, without limitation, any tenant or
predecessor in title to the Real Property. The
covenants, agreements, and indemnities set forth in
this Section shall be binding upon Grantor and its
heirs, successors and assigns, and shall survive
repayment of the Indebtedness, foreclosure of the
Security, and Grantor's granting of a deed in lieu of
foreclosure of the Security. Any costs or expenses
incurred by Beneficiary or Trustee for which Grantor is
responsible or for which Grantor has indemnified
Beneficiary shall be paid to Beneficiary on demand,
with interest at the Default Rate from the date
incurred by Beneficiary until paid in full, and shall
be secured by this Deed of Trust. Without the prior
written consent of Beneficiary, Grantor shall not enter
into any settlement agreement, consent decree, or other
compromise in respect to any claims relating to
Hazardous Substances.
23.5 Environmental Audits
At such times as Beneficiary reasonably determines that
an environmental audit of the Real Property for the
presence of Hazardous Substances is necessary in order
to determine whether the value of the Real Property has
been or may in the future be impaired by the presence
of Hazardous Substances on, about or under the Real
Property (but no more often than annually unless
Beneficiary has reason to believe that Hazardous
Substances may be present), Grantor shall retain, upon
request of Beneficiary, or Beneficiary may retain
directly, at the sole cost and expense of Grantor, a
licensed geologist, industrial hygienist or an
environmental consultant (the "Environmental
Consultant") acceptable to Beneficiary to conduct an
environmental audit of the Real Property. Grantor
shall afford any person conducting an environmental
audit access to the Real Property and all materials
reasonably requested in connection with the
environmental audit. In light of the possible passage
of title to Beneficiary as a result of Default, any
requirement of an environmental audit by Beneficiary
shall be deemed reasonable if a Default exists. Such a
requirement shall also be deemed reasonable if
Beneficiary has received notice of the likely existence
of Hazardous Substances on, about or under the Real
Property. Grantor shall pay the actual and reasonable
cost and expenses of any environmental audit obtained
by Beneficiary within five days of written demand.
Grantor shall at Beneficiary's request comply, at its
sole cost and expense in the most commercially
reasonable manner determined by Grantor, with all
recommendations contained in the environmental audit
required to bring the Real Property into compliance
with all Environmental Laws, or for additional testing
and studies to further determine the location, quantity
and types of Hazardous Substances detected by an
environmental audit.
24. CONCERNING THE TRUSTEE
24.1 No Liability
Trustee will not be liable for any error of judgment or
act, or be otherwise responsible or accountable under
any circumstances. If the Trustee or anyone acting by
virtue of Trustee's powers enters the Real Property,
the Trustee will not be personally liable for debts
contracted or for liability or damages incurred in the
management or operation of the Real Property. Trustee
will have the right to rely on any instrument, document
or signature authorizing or supporting any action taken
or proposed to be taken by Trustee or believed by
Trustee in good faith to be genuine. Trustee will be
entitled to reimbursement for expenses incurred by
Trustee in the performance of Trustee's duties and to
reasonable compensation for services rendered. Grantor
shall, from time to time, pay compensation due Trustee
under this Deed of Trust and reimburse Trustee for and
save and hold Trustee harmless from and against any and
all loss, cost, liability, damage and expense
whatsoever incurred by Trustee in the performance of
Trustee's duties.
24.2 Retention of Money
All money received by Trustee must, until used or
applied, be held in trust for the purposes for which it
was received, but need not be segregated in any manner
from any other money (except to the extent required by
law) and Trustee will have no liability for interest on
any money received.
24.3 Successor Trustees
Trustee may resign by giving of notice of such
resignation in writing to Beneficiary. If Trustee
dies, resigns or becomes disqualified from acting in
the execution of this Trust or fails or refuses to
exercise the same when requested by Beneficiary so to
do or if for any reason and without cause Beneficiary
prefers to appoint a substitute trustee to act instead
of the original Trustee, or any prior successor or
substitute trustee, Beneficiary will have full power to
appoint a substitute trustee and, if preferred, several
substitute trustees in succession who shall succeed to
all the estates, rights, powers and duties of the
Trustee.
24.4 Succession Instruments
Any new Trustee appointed will, without any further
act, deed or conveyance, become vested with all the
estates, properties, rights, powers and trusts of
Trustee's predecessor. Upon the written request of
Beneficiary or of any successor trustee, Trustee
ceasing to act shall execute and deliver an instrument
transferring to such successor trustee all the estates,
properties, rights, powers and trusts of Trustee so
ceasing to act, and shall duly assign, transfer and
deliver any of the property and money held by Trustee
to the successor trustee so appointed in Trustee's
place.
24.5 Performance of Duties by Agents
Trustee may authorize one or more parties to act on
Trustee's behalf to perform Trustee's ministerial
functions, including, without limitation, the
transmittal and posting of any notices.
25. MISCELLANEOUS
25.1 Survival of Obligations
Each and all of the Obligations shall survive the
execution and delivery of the Loan Documents and will
continue in full force and effect until the
Indebtedness and the Obligations have been paid and
satisfied in full.
25.2 Further Assurances
Grantor, upon the request of Beneficiary or Trustee,
shall complete, execute, acknowledge, deliver and
record or file such further instruments and do such
further acts as may be necessary, desirable or proper
to carry out more effectively the purposes of this Deed
of Trust, to subject any property intended to be
covered by this Deed of Trust to the liens and security
interests it creates, to place third parties on notice
of those liens and security interests, or to correct
any defects which may be found in any Loan Document.
Grantor irrevocably appoints Beneficiary as its agent
to complete, execute, deliver and record or file all
such instruments.
25.3 Recording and Filing
Grantor shall cause this Deed of Trust and all
amendments, supplements, and substitutions to be
recorded, filed, re-recorded and refiled in such manner
and in such places as Beneficiary may reasonably
request. Grantor and will pay all recording filing, re-
recording and refiling taxes, fees and other charges.
25.4 No Waiver
No deliberate or unintentional failure by Beneficiary
to require strict performance by Grantor of any
Obligation shall be deemed a waiver, and Beneficiary
shall have the right at any time to require strict
performance by Grantor of any Obligation.
25.5 Expenses
Grantor shall pay all filing and recording fees, and
all expenses incident to the execution and
acknowledgment of this Deed of Trust, any supplements
or amendments, and any instrument entered into under
Subsection 25.2. Grantor shall pay or reimburse
Beneficiary, upon demand, for all costs and expenses,
including appraisal and reappraisal costs of the
Property and reasonable attorneys' and legal
assistants' fees, which Beneficiary may incur in
connection with enforcement proceedings hereunder, and
reasonable attorneys' and legal assistants' fees
incurred by Beneficiary in any other suit, action,
legal proceeding or dispute of any kind in which
Beneficiary is made a party or appears as party
plaintiff or defendant, affecting the Indebtedness,
this Deed of Trust, or the Property, or required to
protect or sustain the lien of this Deed of Trust.
Grantor shall be obligated to pay (or to reimburse
Beneficiary) for such fees, costs and expenses and
shall indemnify and hold Beneficiary and Trustee
harmless from and against any and all loss, cost,
expense, liability, damage and claims and causes of
action, including reasonable attorneys' fees, incurred
or accruing by reason of Grantor's failure to promptly
repay any such fees, costs and expenses.
25.6 Covenants Running with the Land
All Obligations are intended by the parties to be and
shall be construed as covenants running with the Land.
25.7 Successors and Assigns
All of the terms of the Loan Documents shall apply to,
be binding upon and inure to the benefit of the
successors and assigns of the parties.
25.8 Severability
The Loan Documents are intended to be performed in
accordance with, and only to the extent permitted by,
all applicable Legal Requirements. Any provision of
the Loan Documents that is prohibited or unenforceable
in any jurisdiction shall nevertheless be construed and
given effect to the extent possible. The invalidity or
unenforceability of any provision in a particular
jurisdiction shall neither invalidate nor render
unenforceable any other provision of the Loan Document
in that jurisdiction, and shall not affect the validity
or enforceability of that provision in any other
jurisdiction. If a provision is held to be invalid or
unenforceable as to a particular person or under a
particular circumstance, it shall nevertheless be
presumed valid and enforceable as to others, or under
other circumstances.
25.9 Usury
The parties intend that no provision of the Notes or
the Loan Documents be interpreted, construed, applied,
or enforced so as to permit or require the payment or
collection of interest in excess of the highest rate of
interest (the "Maximum Permitted Rate") permitted to be
paid or collected by applicable law with respect to
this transaction. In this regard, Grantor and
Beneficiary each stipulate and agree that it is their
common and overriding intent to contract in strict
compliance with applicable usury laws. Accordingly,
none of the terms of this Deed of Trust, the Notes or
any of the other Loan Documents shall ever be construed
to create a contract to pay, as consideration for the
use, forbearance or detention of money, interest at a
rate in excess of the Maximum Permitted Rate. Grantor
shall never be liable for interest in excess of the
Maximum Permitted Rate. Therefore, (a) in the event
that the Indebtedness and Obligations are prepaid or
the maturity of the Indebtedness and Obligations is
accelerated by reason of an election by Beneficiary,
unearned interest shall be canceled and, if theretofore
paid, shall either be refunded to Grantor or credited
on the Indebtedness evidenced by the Notes, as
Beneficiary may elect; (b) the aggregate of all
interest and other charges constituting interest under
applicable laws and contracted for, chargeable or
receivable under the Notes and the other Loan Documents
or otherwise in connection with the transaction
contemplated thereby shall never exceed the maximum
amount of interest, nor produce a rate in excess of the
Maximum Permitted Rate and (c) if any excess interest
is provided for, it shall be deemed a mistake, and the
same shall, at the option of the holder of the Notes,
either be refunded to Grantor or credited on the unpaid
principal amount (if any), and the Indebtedness
evidenced by the Notes shall be automatically reformed
so as to permit only the collection of the interest at
the Maximum Permitted Rate. Furthermore, if any
provision of the Notes or any of the other Loan
Documents is interpreted, construed, applied, or
enforced, in such a manner as to provide for interest
in excess of the Maximum Permitted Rate, then the
parties intend that such provision automatically shall
be deemed reformed nunc pro tunc so as to require
payment only of interest at the Maximum Permitted Rate.
If, for any reason whatsoever, interest paid or
received during the full term of the applicable
indebtedness produces a rate which exceeds the Maximum
Permitted Rate, then the amount of such excess shall be
deemed credited nunc pro tunc in reduction of the then
outstanding principal amount of the Indebtedness,
together with interest at such Maximum Permitted Rate.
Beneficiary shall credit against the principal of such
Indebtedness (or, if such Indebtedness shall have been
paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be
necessary to cause the interest paid to produce a rate
equal to the Maximum Permitted Rate. All sums paid or
agreed to be paid to Beneficiary for the use,
forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full
term of the applicable indebtedness, so that the
interest rate is uniform throughout the full term of
such indebtedness. In connection with all calculations
to determine the Maximum Permitted Rate, the parties
intend that all charges be excluded to the extent they
are properly excludable under applicable usury laws, as
they from time to time are determined to apply to this
transaction. The provisions of this Section shall
control all agreements, whether now or hereafter
existing and whether written or oral, between Grantor
and Beneficiary.
25.10 Entire Agreement.
The Loan Documents contain the entire agreements
between the parties relating to the financing of the
Real Property, and all prior agreements which are not
contained in the Loan Documents, other than the
Indemnification Against Unsecured Environmental
Liabilities, are terminated. The Loan Documents
represent the final agreement between the parties and
may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements
between the parties.
The Loan Documents may be amended, revised, waived,
discharged, released or terminated only by a written
instrument or instruments executed by the party against
which enforcement of the amendment, revision, waiver,
discharge, release or termination is asserted. Any
alleged amendment, revision, waiver, discharge, release
or termination that is not so documented shall be null
and void.
25.11 Notices.
All notices demands, consents, approvals and other
communications given pursuant to this Deed of Trust
must be in writing and must be sent by hand, or by
telecopy (with a duplicate copy sent by ordinary mail,
postage prepaid), or by postage prepaid, certified or
registered mail, return receipt requested, or by
reputable overnight courier service, postage prepaid,
addressed to the party to be notified as set forth
below:
if to Beneficiary:
Life Investors Insurance Company of America
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5223
Attn. Mortgage Loan Department
Telecopy Number: (319) 369-2188
if to Grantor:
AIP Properties #3, L.P.
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
Attn: David B. Warner
Telecopy Number: (972) 550-6037
Notices will be deemed given when delivered to
Beneficiary or to Grantor, as applicable (regardless of
whether delivered to the persons stated above to
receive copies), by hand or when a legible copy is
received by telecopier (provided receipt is verified by
telephone confirmation or one of the other permitted
means of giving Notices under this Subsection), or if
mailed, three (3) days after mailing (or on the date of
delivery for overnight courier service), with failure
to accept delivery constituting delivery for this
purpose. The parties agree to use reasonable efforts
to provide the copies of Notices required above, but
delivery of such copies shall not be required for
effective delivery of Notice. Actual notice, however
and from whomever given or received, will always be
effective Notice when received. Beneficiary may change
its address for Notices set forth above by giving at
least ten (10) days' prior Notice of such change in
writing to Grantor. Grantor may change the addresses
for Notices set forth above by giving at least thirty
(30) days' prior Notice of such change in writing to
Beneficiary.
25.12 Counterparts.
This Deed of Trust may be executed in any number of
counterparts, each of which shall be an original, but
all of which together shall constitute but one
instrument.
25.13 Applicable Law.
This Deed of Trust will be interpreted, construed,
applied, and enforced according to, and will be
governed by, the laws of the State of Texas, without
regard to any choice of law principles which, but for
this provision, would require the application of the
law of another jurisdiction and regardless of where
executed or delivered, where payable or paid, where any
cause of action accrues in connection with this
transaction, where any action or other proceeding
involving this Deed of Trust is instituted or pending,
or whether the laws of the State of Texas otherwise
would apply the laws of another jurisdiction.
25.14 Headings and General Application.
The section, subsection, and paragraph headings of this
Deed of Trust are provided for convenience of reference
only and shall in no way affect, modify or define, or
be used in construing, the text of the sections ,
subsections or paragraphs. If the text requires, words
used in the singular shall be read as including the
plural, and pronouns of any gender shall include all
genders.
25.15 Sole Benefit.
This Deed of Trust and the other Loan Documents have
been executed for the sole benefit of Grantor and
Beneficiary and the successors and assigns of
Beneficiary. No other party shall have rights
thereunder or be entitled to assume that the parties
thereto will insist upon strict performance of their
mutual obligations hereunder, any of which may be
waived from time to time. Grantor shall have no right
to assign any of its rights under the Loan Documents to
any party whatsoever.
25.16 Subrogation.
If any or all of the proceeds of the Indebtedness or
Obligations have been used to extinguish, extend or
renew any indebtedness heretofore existing against the
Property or to satisfy any indebtedness or obligation
secured by a lien or encumbrance of any kind (including
liens securing the payment of any Impositions), such
proceeds have been advanced by Beneficiary at Grantor's
request, and to the extent of such funds so used, the
Indebtedness and Obligations in this Deed of Trust
shall be subrogated to and extend to all of the rights,
claims, liens, titles and interests heretofore existing
against the Property pursuant thereto to secure the
indebtedness or obligation so extinguished, paid,
extended or renewed, and the rights, claims, liens,
titles and interests of Beneficiary pursuant thereto,
shall not be waived but rather shall be continued in
full force and effect and in favor of Beneficiary and
shall be merged with the lien and security interest
created herein as cumulative security for the repayment
of the Indebtedness and satisfaction of the
Obligations.
25.17 Release of Claims.
Grantor hereby RELEASES, DISCHARGES and ACQUITS forever
Beneficiary and Trustee and their officers, directors,
trustees, agents, employees and counsel (in each case,
past, present or future) from any and all Claims
existing as of the date hereof (or the date of actual
execution hereof by Grantor, if later). As used
herein, the term "Claim" shall mean any and all
liabilities, claims, defenses, demands, actions, causes
of action, judgments, deficiencies, interest, liens,
costs or expenses (including court costs, penalties,
attorneys' fees and disbursements, and amounts paid in
settlement) of any kind and character whatsoever,
including claims for usury, breach of contract, breach
of commitment, negligent misrepresentation or failure
to act in good faith, in each case whether now known or
unknown, suspected or unsuspected, asserted or
unasserted or primary or contingent, and whether
arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of
laws or regulations or otherwise.
25.18 No Partnership.
Nothing contained in the Loan Documents is intended to
create any partnership, joint venture or association
between Grantor and Beneficiary, or in any way make
Beneficiary a co-principal with Grantor with reference
to the Property.
25.19 Payoff Procedures
If Grantor pays or causes to be paid to Beneficiary all
of the Indebtedness, then the Trustee's interest in the
Real Property shall cease, and upon receipt by
Beneficiary of such payment, Beneficiary shall either
(a) assign the Loan Documents and endorse the Notes (in
either case without recourse or warranty of any kind)
to a takeout lender, upon payment of an administrative
fee of $750, or (b) release this Deed of Trust.
IN WITNESS WHEREOF, Grantor has executed and delivered this
Deed of Trust as of the date first set forth above.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3 GP,
Inc.,
a Texas corporation,
its General Partner
By
_____________________
David B. Warner
Vice President
STATE OF )
) SS.
COUNTY OF )
I HEREBY CERTIFY that on this ___ day of November,
1996, before me, ___________________________________, a Notary
Public in and for the State and County aforesaid, personally
appeared David B. Warner, who acknowledged himself to be the Vice
President of AIP Properties #3 GP, Inc., a corporation organized
under the laws of Delaware and the General Partner of AIP
Properties #3, L.P., a limited partnership organized under the
laws of Delaware, and that, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by
signing the name of the limited partnership by himself as such
Vice President of AIP Properties #3 GP, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
_________________________________
Notary Public
My Commission Expires:
(NOTARIAL SEAL)
EXHIBIT A
EXHIBIT B
AIP Industrial Portfolio
Woodlake Distribution Center
Bexar County, Texas
AEGON Loan No. 87487
$1,537,500 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $1,537,500, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$13,000.63. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d) a
Deed of Trust and Security Agreement granted by Borrower for
the benefit of Lender, conveying certain real property
located at 6111 and 6155 Woodlake, San Antonio, Bexar
County, Texas (individually, a "Deed of Trust" and,
collectively, the "Deeds of Trust"), and by Assignments of
Leases and Rents granted by Borrower to Lender assigning the
landlord's interest in all present and future leases of all
or any portion of the real properties encumbered by the
Deeds of Trust. Reference is made to the Loan Documents for
a description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
ATTENTION: COUNTY CLERK_THIS INSTRUMENT COVERS GOODS THAT ARE OR
WILL BECOME FIXTURES ON THE DESCRIBED REAL PROPERTY AND SHOULD BE
FILED FOR RECORD IN THE REAL PROPERTY RECORDS WHERE DEEDS OF
TRUST ON REAL ESTATE ARE RECORDED. THIS INSTRUMENT SHOULD ALSO
BE INDEXED AS A UNIFORM COMMERCIAL CODE FINANCING STATEMENT
COVERING GOODS THAT ARE OR WILL BECOME FIXTURES ON THE DESCRIBED
REAL PROPERTY. THE MAILING ADDRESSES, TELEPHONE NUMBERS, AND FAX
NUMBERS OF THE SECURED PARTY AND THE DEBTOR ARE WITHIN.
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
AIP Properties #3, L.P., a Delaware limited partnership
Grantor
having an office at
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
to
Frederick J. Rerko, Trustee
for the benefit of
Life Investors Insurance Company of America,
an Iowa corporation,
Beneficiary,
having an office
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Loan Amount: $27,990,000
After recording, please return to:
Gary Whittington, Esq.
AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Deed of Trust and Security Agreement
(with UCC Financing Statement for Fixture Filing)
This Deed of Trust and Security Agreement is made and given this
___ day of November, 1996 by AIP Properties #3, L.P., a limited
partnership organized under the laws of Delaware, having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Grantor"), to Frederick J. Rerko, as Trustee, whose
mailing address is c/o Jones, Day, Reavis & Pogue, 2300 Trammell
Crow Center, 2001 Ross Avenue, Dallas, Texas 75201 ("Trustee"),
for the benefit of Life Investors Insurance Company of America,
corporation organized under the laws of Iowa having an office c/o
AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499-5223 ("Beneficiary"). The definitions of
capitalized terms used in this Deed of Trust may be found either
in Section 3 below, or through the cross-references provided in
that Section.
1. RECITALS
Under the terms of a commercial mortgage Revised Mortgage
Loan Application and Commitment dated July 18, 1996 (the
"Commitment"), AEGON USA Realty Advisors, Inc. ("AEGON"), as
agent for Beneficiary, agreed to fund a loan in an original
principal amount to be determined in accordance with
procedures described in the Commitment (the "Loan").
Beneficiary has funded the Loan in the principal amount of
$27,990,000 in accordance with the Commitment, and to
evidence the Loan Grantor has executed and delivered to
Beneficiary ten promissory notes in the aggregate amount of
$27,990,000.
The Commitment requires that the Loan be secured by certain
real property and by certain tangible and intangible
personal property.
2. GRANTING CLAUSE
To secure the repayment of the Indebtedness, and in
consideration of the sum of ten dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which
are acknowledged, Grantor grants, bargains, sells, warrants,
conveys, alienates, releases, assigns, sets over and
confirms to Trustee, in trust with the power of sale for the
benefit of Beneficiary, and to his successors and assigns
forever, the Real Property, the Leases, the Rents, the
Assigned Rights, the Condemnation Proceeds, and the
Insurance Proceeds, and grants to Beneficiary a security
interest in the Personal Property.
3. DEFINED TERMS
Appurtenant Easements
means the declarations, easements, covenants,
restrictions and agreements, if any, identified on
the attached Exhibits A-1 through A-7.
Assigned Rights
means all of Grantor's rights (whether presently
existing or arising in the future) under all
contracts, claims and licenses that relate to the
Real Property and may benefit its owner, including
air rights, mineral rights, water rights, claims
against third parties for damages to the Property,
construction, roof and equipment guarantees and
warranties, building licenses and permits,
management contracts, service contracts, leases of
Fixtures or of Personal Property, and all of
Grantor's right, title and interest (whether
presently existing or arising in the future) in
and to unearned insurance premiums, any greater
estate in the Real Property, trade names, property
management files, accounting books and records,
trademarks, tradestyles, service marks,
copyrights, accounting books and records, site
plans, surveys, blueprints, and construction
drawings, plans and specifications, and the work
product of architects, environmental consultants,
property tax consultants, engineers, and any other
third party contractors whose services benefit the
Real Property.
Assignment of Leases and Rents
means the Loan Document bearing this heading.
Business Day
means any day when state and federal banks are
open for business in Cedar Rapids, Iowa.
Condemnation Proceeds
means all money or other property that has been,
or is in the future, awarded or agreed to be paid
or given in connection with any taking by eminent
domain of all or any part of the Real Property
(including a taking through the vacation of any
street dedication or through a change of grade of
such a street), either permanent or temporary, or
in connection with any purchase in lieu of such a
taking, or as a part of any related settlement.
Conditional Grace Period
means a period of thirty (30) days, except when
applicable to a failure of any term, condition, or
provision under this Deed of Trust which arises
from facts, circumstances, acts, or omissions
which are not the fault of Grantor, in which in
which case Conditional Grace Period shall mean a
period of sixty (60) days.
Default
means any of the acts, omissions, or circumstances
specified in Section 10 below.
Environmental Indemnity Agreements
means each of the documents captioned
"Environmental Indemnity Agreement" executed with
respect to the Real Property and the real property
encumbered by the Other Deeds of Trust.
Environmental Laws
means all present and future laws, statutes,
ordinances, rules, regulations, orders, and
determinations of any Governmental Authority
pertaining to health, underground storage tank
regulation or removal, protection of the
environment, natural resources, wetlands,
conservation, wildlife, waste management,
regulation of activities involving Hazardous
Substances, and pollution, or relating to waste
disposal or environmental protection with respect
to the exposure to, or manufacture, possession,
presence, use, generation, storage,
transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal,
remediation or handling of any Hazardous
Substances, including, without limitation, the
Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601
et seq., the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C.
9601(20)(D), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., the Federal
Water Pollution Control Act, as amended by the
Clean Water Act , 33 U.S.C. 1251 et seq., the
Clean Air Act , 42 U.S.C. 7401 et seq. and the
Toxic Substances Control Act, 15 U.S.C. 2601 et
seq., all as amended from time to time.
ESA
means the written environmental site assessment of
the Real Property prepared by a consultant hired
directly by Beneficiary under the terms of the
Commitment.
Escrow Expenses
means those expenses in respect of Insurance
Premiums and Impositions that Beneficiary elects
to pay directly from the Escrow Fund using moneys
accumulated through the collection of Monthly
Escrow Payments.
Escrow Fund
means the accounting entry maintained on the books
of Beneficiary as funds available for the payment
of Escrow Expenses under the terms of this Deed of
Trust.
Financing Statements
means the Uniform Commercial Code financing
statements filed to perfect the security interests
securing the Indebtedness, as amended or extended
from time to time.
Fixtures
means all materials, supplies, equipment,
apparatus and other items now or hereafter
attached to or installed on the Real Property in a
manner that causes them to become fixtures under
the law of Texas, including all built-in or
attached furniture or appliances, elevators,
escalators, heating, ventilating and air
conditioning system components, emergency
electrical generators and related fuel storage or
delivery systems, septic system components, storm
windows, doors, electrical equipment, plumbing,
water conditioning, lighting, cleaning, snow
removal, lawn, landscaping, irrigation, security,
incinerating, firefighting, sprinkler or other
fire safety equipment, bridge cranes or other
installed materials handling equipment, satellite
dishes or other telecommunication equipment, built-
in video conferencing equipment, sound systems or
other audiovisual equipment, and cable television
distribution systems. Fixtures do not include
trade fixtures, office furniture and office
equipment owned by tenants and neither necessary
nor desirable for the operation of the Real
Property as income-producing commercial real
estate.
Governmental Authority
means any political entity with the legal
authority to impose any requirement on the
Property, including the governments of the United
States, the State of Texas, and the county and
municipality in which the Property is located and
any other entity with jurisdiction to decide,
regulate, or affect the ownership, construction,
use, occupancy, possession, operation,
maintenance, alteration, repair, demolition or
reconstruction of any portion or element of the
Real Property.
Hazardous Substances
means: (A) any hazardous wastes or toxic
chemicals, materials, substances or wastes as
defined by the Environmental Laws; (B) any "oil,"
as defined by the Clean Water Act and regulations
promulgated thereunder (including crude oil or any
fraction of crude oil); (C) any substance, the
presence of which is now or in the future
prohibited, regulated or controlled by any
Environmental Law or any other law, regulation,
statute or ordinance of any Governmental
Authority; (D) any asbestos or asbestos containing
materials, (E) any polychlorinated biphenyls
("PCBs"), (E) urea formaldehyde, (F) atmospheric
radon at levels over four picocuries per cubic
liter; (G) any solid, liquid, gaseous or thermal
irritant or contaminant, such as smoke, vapor,
soot, fumes, alkalis, acids, chemicals,
pesticides, herbicides, sewage, industrial sludge
or similar wastes, and (H) any industrial, nuclear
or medical by-products. However, "Hazardous
Substances" include neither (a) immaterial
quantities of automotive motor oil leaked
inadvertently from vehicles in the ordinary course
of the operation of the Real Property and cleaned
up in accordance with reasonable property
management procedures and any applicable law nor
(b) immaterial quantities of substances
customarily and prudently used in the cleaning and
maintenance of the Real Property in accordance
with any applicable law.
Impositions
means all real and personal property taxes;
general or special assessments; ground rent;
water, gas, sewer, vault, electric or other
utility rates and charges; common charges; owners'
association dues or fees; ground rent; personal
and ad valorem property taxes; fees for any
easement, license or agreement maintained for the
benefit of the Property; and any and all other
taxes, levies, user fees, claims, charges and
assessments whatsoever that at any time may be
assessed, levied or imposed on the Property or
upon its ownership, use, occupancy or enjoyment,
and any related costs, interest or penalties.
Improvements
means all buildings and improvements of any kind
erected or placed on any piece or parcel of the
Land now or in the future, including the Fixtures,
together with all appurtenant rights, privileges,
easements, tenements, hereditaments, titles,
reversions, remainders and other interests.
Indebtedness
means all sums that are owed or become due
pursuant to the terms of the Notes, this Deed of
Trust, or any of the other Loan Documents,
including scheduled principal payments, scheduled
interest payments, default interest, late charges,
prepayment premiums, accelerated or matured
principal balances, advances, collection costs,
receivership costs, fees and costs of the Trustee
and all other financial obligations of Grantor
incurred in connection with the Loan transaction.
Indemnity Agreements
means each of the documents captioned "Indemnity
Agreement" executed by American Industrial
Properties REIT of even date herewith.
Insurance Premiums
means all premiums or other charges required to
maintain in force any and all insurance policies
that this Deed of Trust requires that Grantor
maintain.
Insurance Proceeds
means all proceeds of all insurance now or
hereafter carried by or payable to Grantor with
respect to the Property, or the interruption of
rents or income derived from the Property, all
unearned insurance premiums and all related claims
or demands.
Land
means, individually, one of, and, collectively,
all of, those certain tracts of described on the
attached Exhibits A-1 through A-7, together with
all appurtenances, including all Grantor's right,
title and interest to and in the air space above
the Land and all alley, party wall, drainage,
sewer, mineral, water, oil and gas, vault and
other rights, estates, titles, interests,
privileges, easements, tenements, hereditaments,
titles, royalties, reversions, remainders and
other interests.
Leases
means all leases, subleases, licenses,
concessions, extensions, renewals and other
agreements (whether written or oral, and whether
presently effective or made in the future) through
which Grantor grants any possessory interest in
and to, or any right to occupy or use, all or any
part of the Real Property, and any related
guaranties.
Legal Requirements
means all laws, statutes, rules, regulations,
ordinances, judicial decisions, administrative
decisions, building permits, development permits,
certificates of occupancy, or other requirements
of any Governmental Authority.
Loan Agreement
means that certain Loan Agreement of even date
herewith, by and among, Grantor, Beneficiary, and
American Industrial Properties REIT, wherein
Beneficiary agrees to make the Loan to Grantor.
Loan Documents
means all documents evidencing the Loan or
delivered in connection with the Loan (including
the Notes, this Deed of Trust, and the Other Deeds
of Trust), whether entered into at the closing of
the Loan or in the future, other than the
Environmental Indemnity Agreements and the
Indemnity Agreements, which are not Loan Documents
and are not secured hereby.
Monthly Escrow Payment
means the sum of the Monthly Imposition
Requirement, the Monthly Insurance Premium
Requirement, and the Monthly Reserve Requirement.
Monthly Imposition Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and, if future Impositions are as
yet undetermined, on a 5% annual inflation factor)
will be required to permit the timely payment of
the Impositions by Beneficiary.
Monthly Insurance Premium Requirement
means one-twelfth of the annual amount that
Beneficiary estimates (based on available
historical data and using, if future Insurance
Premiums are as yet undetermined, a 5% inflation
factor) will be required to permit the timely
payment of the Insurance Premiums by Beneficiary.
Monthly Reserve Requirement
means the amount that Beneficiary estimates will,
over the subsequent twelve months, result in the
accumulation of a surplus in the Escrow Fund equal
to one-sixth of the sum of the Annual Imposition
Requirement and the Annual Insurance Premium
Requirement.
Note
means any one of the ten promissory notes made by
Grantor in the aggregate amount of $27,990,000,
together with all extensions and modifications.
Notes
means the ten promissory notes made by Grantor in
the aggregate amount of $27,990,000, together with
all extensions and modifications of any one or
more of them.
Notice
means a notice given in accordance with the
provisions of Subsection 25.10.
Obligations
means all of the obligations required to be
performed under the terms and conditions of any of
the Loan Documents by any person other than the
Trustee or Beneficiary.
Obligor
means Grantor or any other natural person, trust
or business organization that is liable under the
Loan Documents for the payment of any portion of
the Indebtedness, or the performance of any other
Obligation, under any circumstances.
Other Deeds of Trust
means the three other Deeds of Trust and Security
Agreements executed by Grantor of even date
herewith for the benefit of Beneficiary as
security for the Notes and encumbering, inter
alia, real property owned by Grantor in Bexar
County, Texas and in the States of California and
Maryland.
Permitted Encumbrances
means the encumbrances or other matters listed on
Exhibits B-1 through B-7.
Permitted Transfer
means a transfer specifically described in Section
11 as permitted.
Personal Property
means all materials, appliances, equipment or
items located at the Real Property now or in the
future and that may be incorporated in the Real
Property through construction, attachment, or
installation, or that are used, or are capable of
being used, in the operation of the Real Property
as commercial real estate, including (i)
appliances, equipment or items required under any
lease to be provided by Grantor to any tenant,
(ii) materials or equipment for use in the
maintenance, alteration, landscaping or repair of
the Real Property, including snow removal, lawn,
landscaping, irrigation, security, incineration,
and hazardous waste storage, monitoring, testing,
containment or abatement supplies and equipment;
(iii) electrical lights and fixtures (whether or
not permanently wired), backup generators and
related fuel storage and delivery systems, (iv)
rugs, carpeting, office furnishings, art work,
decorations, window treatments and equipment
located in any on-site leasing office, located in
any lobby, hall or other common area, or used in
connection with any "executive suites" operation,
(v) vehicles used to transport prospective tenants
or to maintain or operate the Real Property, (vi)
components of heating, ventilation and air
conditioning systems and air quality testing
equipment, (vii) spare or detached parts for
elevators, escalators or other mechanical systems,
(viii) all site or building plans and
specifications, construction records, and
architectural or engineering drawings relating to
the Real Property, (ix) sewer or septic system
components, (x) water wells, whether for purposes
of water supply or groundwater testing or
sampling, (xi) components of plumbing and water
conditioning systems, (xii) firefighting,
sprinkler or other fire safety equipment, (xiii)
central telephone switches, antennae, satellite
dishes or other telecommunication equipment, and
(xiv) video conferencing equipment, audio
equipment and cable television distribution
systems.
Property
means, as the context requires, (a) all of the
Real Property, the Personal Property, the Leases,
the Rents, the Assigned Rights, the Condemnation
Proceeds and the Insurance Proceeds, or (b) a
single Real Property, together with that portion
of the Personal Property, the Leases, the Rents,
the Assigned Rights, the Condemnation Proceeds and
the Insurance Proceeds appurtenant thereto.
Real Property
means, as the context requires, (a) all of the
Land, the Improvements, the Fixtures, and all of
Grantor's right, title and interest to all
appurtenant rights, privileges, tenements,
hereditaments, easements, or other interests that
run with the Land, including any Appurtenant
Easements, benefits of railroad sidings, drainage
rights, sewer rights and rights of ingress and
egress, or (b) a single piece, parcel, or tract of
the Land, together with the Improvements, the
Fixtures appurtenant thereto, and all appurtenant
rights, privileges, tenements, hereditaments,
easements, or other interests that run therewith.
Recourse Obligations
means the recourse obligations, or "carveouts,"
that are defined in the Notes and in Section 21.
Rents
means all rents, lease termination fees, proceeds
of letters of credit or other devices securing
future rental payments, revenues, income,
proceeds, royalties, profits and other benefits
paid or payable for using, leasing, licensing,
possessing, operating from or in, residing in,
selling, mining, extracting, or otherwise enjoying
the Real Property, whether presently existing or
arising in the future, to which Grantor may now or
hereafter become entitled or may demand or claim.
Threshold Number
means $250,000.
Trustee
means Frederick J. Rerko and his successors and
assigns.
4. TITLE
Grantor represents to and covenants with Beneficiary and
with its successors and assigns, that at the point in time
of the grant of the lien created by this Deed of Trust,
Grantor is well seized of good and indefeasible estate to
the Real Property, in fee simple absolute, subject to no
lien or encumbrance except the Permitted Encumbrances.
Grantor has good and merchantable title to the Personal
Property, and has the uncontestable right to grant a first
priority security interest in the Personal Property, free of
any rights of lessors or of sellers under conditional sales
contracts or other financing arrangements. Grantor warrants
this estate and title to Beneficiary and to its successors
and assigns forever, against all lawful claims and demands.
Grantor shall maintain mortgagee title insurance from a
solvent carrier, insuring Beneficiary in the amount of the
Loan or such lesser amount agreed upon by Beneficiary, that
the Deed of Trust constitutes the first and best lien on the
Real Property. This Deed of Trust is and shall remain a
valid and enforceable first lien on the Real Property, and
if the validity or enforceability of this first lien is
attacked or called into question, Grantor shall diligently
and continuously defend it through appropriate proceedings.
Should it fail to do so, Beneficiary may at Grantor's
expense take all necessary and proper action, including the
engagement and compensation of legal counsel, the
prosecution or defense of litigation, and the compromise or
discharge of claims. Grantor shall defend, indemnify and
hold Beneficiary harmless in any suit or proceeding brought
to challenge or attack the validity, enforceability or
priority of the lien granted by this Deed of Trust. If a
prior mechanics' or materialmen's lien on the Real Property
arises by operation of statute during any construction or
repair of the Improvements, Grantor shall either cause the
lien to be discharged by paying when due any amounts owed to
such persons, or shall comply with Section 12 of this Deed
of Trust.
5. REPRESENTATIONS AND WARRANTIES
Grantor (i) represents to Beneficiary, and to its successors
and assigns, that the following statements are true as of
the date of this Deed of Trust, and (ii) warrants to
Beneficiary, and to its successors and assigns, that the
following statements shall remain true during the term of
the Loan:
5.1 Formation and Existence
Grantor is a limited partnership duly formed and
validly existing under the laws of Delaware, is duly
qualified to do business in and is in good standing
under, the laws of Texas, and has obtained all licenses
and permits and filed all statements of fictitious name
and registrations necessary for the lawful operation of
its business.
5.2 Power and Authority
Grantor has full power and authority to carry on its
business as presently conducted, to own the Property,
to execute and deliver the Loan Documents that it has
executed, and to perform its obligations under them.
5.3 Due Authorization
The Loan transaction and the performance of all of
Grantor's obligations under the Loan Documents have
been duly authorized by all requisite partnership
action, and each individual executing any Loan Document
on behalf of Grantor has been duly authorized to do so.
5.4 No Default or Violations
The execution and performance of Grantor's obligations
under the Loan Documents will not result in any breach
of, or constitute a default under, any contract,
agreement, document or other instrument to which
Grantor is a party or by which Grantor may be bound or
affected, and do not and will not violate or contravene
any law to which Grantor is subject; nor do any such
other instruments impose or contemplate any obligations
which are or will be inconsistent with the Loan
Documents.
5.5 No Further Approvals or Actions Required
No approval by, authorization of, or filing with any
federal, state or municipal or other governmental
commission, board or agency or other governmental
authority is necessary in connection with the
authorization, execution and delivery of the Loan
Documents by Grantor.
5.6 Due Execution and Delivery
Each of the Loan Documents to which Grantor is a party
has been duly executed and delivered on behalf of
Grantor.
5.7 Legal, Binding, Valid and Enforceable
Each of the Loan Documents to which Grantor is a party
constitutes the legal, valid and binding obligation of
Grantor, enforceable against Grantor in accordance with
its terms, except to the extent that its enforceability
may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights
generally or by equitable principles of general
application (whether considered in an action at law or
in equity).
5.8 Accurate Financial Information
All financial information furnished by Grantor to
Beneficiary in connection with the application for the
Loan is true, correct and complete in all material
respects and does not omit to state any fact or
circumstance necessary to make the statements in them
not misleading, and there has been no material adverse
change in the financial condition of Grantor since the
date of such financial information.
5.9 Compliance with Legal Requirements
All governmental approvals, and licenses required in
order for Grantor to conduct its business and maintain
and operate the Real Property in compliance with
applicable law are in full force and effect, and the
Real Property currently is being operated in compliance
with all applicable legal requirements in all material
respects.
5.10 Contracts and Franchises
All contracts and franchises necessary in order for
Grantor to conduct its business and operate the Real
Property in accordance with good commercial practice
are in force.
5.11 No Condemnation Proceeding
Grantor has no knowledge of any present, pending or
threatened condemnation proceeding or award affecting
the Real Property.
5.12 No Casualty
No damage to the Real Property by any fire or other
casualty has occurred and remained unrepaired.
5.13 Complete Lots and Tax Parcels
The Land is comprised exclusively of tax parcels that
are entirely included within the Land, and of
subdivision lots that are entirely included within the
Land.
6. COVENANTS
6.1 Payment and Performance
Grantor shall pay the Indebtedness and perform all of
its other obligations under the Loan Documents, as and
when the Loan Documents require such payment and
performance.
6.2 Payment of Impositions
Grantor shall pay the Impositions on or before the last
day on which they may be paid without penalty or
interest, and shall, within thirty days, furnish
Beneficiary with a paid receipt or a canceled check as
evidence of payment. If Beneficiary does not receive
such evidence, Beneficiary may secure it directly. If
it does so, Beneficiary will charge Grantor an
administrative fee of $250 for each piece or parcel of
Land for which it secures the evidence of payment.
This fee will be a demand obligation under the terms of
this Deed of Trust. Grantor may meet the requirements
of this Subsection by remitting the Monthly Escrow
Payments when due, by immediately providing notice to
Beneficiary of any new Imposition or increased
Imposition unknown to Beneficiary, and by paying to
Beneficiary on demand any amount required to increase
the Escrow Fund to an amount sufficient to permit
Beneficiary to pay all Impositions from the Escrow Fund
on time. If Grantor wishes to contest the validity or
amount of an Imposition, it may do so by complying with
Section 12.
If any new Legal Requirement taxes the Deed of Trust so
that the yield on the Indebtedness would be reduced,
and Grantor may lawfully pay the tax or reimburse
Beneficiary for its payment, Grantor shall do so.
6.3 Maintenance of the Real Property
Grantor shall not commit or permit any waste of the
Real Property as a physical or economic asset, and
agrees to maintain in good repair the Improvements,
including structures, roofs, mechanical systems,
parking lots or garages, and other components of the
Real Property that are necessary or desirable for the
use of the Real Property, or which Grantor as landlord
under any Lease is required to maintain for the benefit
of any tenant. In its performance of this obligation,
Grantor shall promptly and in a good and workmanlike
manner repair or restore any elements of the
Improvements that are damaged or destroyed as required
under Subsection 6.3. Grantor shall also replace
roofs, parking lots, mechanical systems, and other
elements of the Real Property requiring periodic
replacement. Grantor shall carry out such replacements
no less frequently than would any commercially
reasonable owner intending to maintain the maximum
income-generating potential of the Real Property over
its reasonable economic life. Grantor shall not,
without the prior written consent of Beneficiary,
demolish, reconfigure, or materially alter the
Improvements, but Beneficiary agrees that any request
for its consent to such an action shall be deemed given
if Beneficiary declines to respond within fifteen (15)
Business Days to any written request for such a
consent, if the request is accompanied by all materials
required to permit Beneficiary to analyze the proposed
action
6.4 Use of the Real Property
Grantor shall cause the Real Property to be used as a
service center, office, or warehouse property and for
no other purpose.
6.5 Independence of the Real Property
Grantor shall maintain the independence of the Real
Property from other land and improvements not included
within or located on the Land. In fulfilling this
covenant, Grantor shall neither take any action which
would make it necessary to own or control any property
other than the Real Property in order to meet the
obligations of the landlord under any Lease, or in
order to comply with the Legal Requirements, nor take
any action which would cause any land or improvements
other than the Land and the Improvements to rely upon
the Land or the Improvements for those purposes, nor
impair the integrity of the Land as one or more
complete subdivided lots and tax parcels.
6.6 Rebuilding upon Casualty and Remediation of Effect of
Condemnation
If a casualty occurs, Grantor shall rebuild the
Improvements. If any portion of the Real Property is
taken by power of eminent domain, Grantor shall remedy
its effects. In either case, the rebuilding or
remediation shall restore the Real Property's value and
potential to generate income in proportion to the
amount of the Indebtedness remaining after any
application of Insurance Proceeds or Condemnation
Proceeds to the Indebtedness.
6.7 Performance of Landlord Obligations
Grantor shall perform its obligations as landlord under
the Leases, and shall neither take any action, nor fail
to take any action, if the action or failure would be
inconsistent with the commercially reasonable
management of the property for the purpose of enhancing
its long-term performance and value. Grantor shall
not, without Beneficiary's written consent, extend,
modify, terminate or enter into any lease of the Real
Property, except in compliance with the Agreement
Regarding Leasing, which Beneficiary and Grantor have
entered into today, and which grants certain rights,
personally, to Grantor.
6.8 Financial reports and Operating Statements
During the term of the Loan, Grantor shall maintain
complete and accurate accounting and operational
records, including copies of all Leases and other
written contracts relating to the Real Property, copies
of all tax statements, and evidence to support the
payment of all material property-related expenses.
Within 120 days of the end of each fiscal year, Grantor
shall deliver to Beneficiary (A) copies of the
consolidated financial statements of Grantor and its
general partner, prepared by an independent certified
public accountant in accordance with generally accepted
accounting principles, consistently applied, (B) a
complete and accurate operating statement for the Real
Property, and (C) a complete rent roll (listing
tenants, unit numbers, square feet occupied and leased,
rents, delinquencies, vacancies, other income received
and expenses), all certified as true and correct by
Grantor and in form satisfactory to Beneficiary. If
Grantor fails to deliver the items required in this
Subsection, Beneficiary may engage an accounting firm
to prepare the required items. In connection with the
engagement of this firm and its supervision, Grantor
shall pay Beneficiary an administrative fee of $1,000.
Grantor shall cooperate fully with any investigative
audit required to permit the accounting firm to produce
these items, and the fees and expenses incurred in
connection with their preparation shall be paid by
Grantor on demand.
7. INSURANCE REQUIREMENTS
At all times until the Indebtedness is paid in full, Grantor
shall maintain insurance coverage and administer insurance
claims in compliance with this Section.
7.1 Required Coverages
(a) All Risk/Open Perils Special Form Property
Grantor shall maintain coverage of 100% of the
replacement cost of all insurable elements of the
Real Property all tangible Personal Property. If
a coinsurance clause is in effect, an agreed
amount endorsement is required. Blanket policies
must include limits by property location.
Coverage shall extend to the Real Property and to
all tangible Personal Property.
(b) Broad Form Boiler and Machinery
If any such item is located on or about the Real
Property, Grantor shall maintain this coverage,
including a form of business income coverage.
(c) Flood
If the Real Property is located in a special flood
hazard area according to the most current flood
insurance rate map issued by the Federal Emergency
Management Agency and if flood insurance is
available, Grantor shall maintain flood insurance
coverage of all insurable elements of Real
Property and of all tangible Personal Property.
(d) Business Interruption
Grantor shall maintain a form of business income
coverage in the amount of 80% of one year's
business income from the Property. Blanket
policies must include limits by property location.
(e) Comprehensive/general liability
Grantor shall maintain such coverage (which may be
in the form of umbrella/excess liability
insurance) with a $1,000,000 combined single limit
per occurrence and a minimum aggregate limit of
$2,000,000.
(f) Liquor liability
Grantor shall maintain such coverage, if
applicable law may impose liability on those
selling, serving, or giving alcoholic beverages to
others and if such beverages will be sold, served
or given on the Real Property by Grantor.
(g) Elective coverages
Beneficiary may require additional coverages
appropriate to the property type and site
location. Additional coverages may include
earthquake, mine subsidence, sinkhole, personal
property, supplemental liability, or coverages of
other property-specific risks.
7.2 How Beneficiary Should Be Named
On all property policies and coverages (including
coverage against loss of business income), Beneficiary
must be named as "first mortgagee" under a standard
mortgage clause. On all liability policies and
coverages, Beneficiary must be named as an "additional
insured." Beneficiary should be referred to verbatim as
follows: "Life Investors Insurance Company of America
and its successors, assigns, and affiliates; as their
interest may appear; c/o AEGON USA Realty Advisors,
Inc.; Mortgage Loan Dept.; 4333 Edgewood Rd., NE; Cedar
Rapids, Iowa 52499-5223."
7.3 Rating
Each insurance carrier must be rated A, Class XII, or
better by Best's Rating Service, without regard to its
parent's or any reinsurer's rating.
7.4 Deductible
The maximum deductible on all coverages and policies is
$25,000.
7.5 Notices, Changes and Renewals.
All policies must require the insurance carrier to give
Beneficiary a minimum of thirty (30) days notice in the
event of cancellation or non-renewal. Grantor shall
report to Beneficiary immediately any vacancy, change
of title, tenant occupancy or use, physical damage,
additional improvements or other factors affecting any
insurance contract. An original or certified copy of
each policy is required upon renewal. If no such copy
is available, Beneficiary will accept a binder for a
period not to exceed 90 days. All binders,
certificates of insurance, and original or certified
copies of policies must name Beneficiary as a named
insured, or as an additional insured, must include the
complete and accurate property address and must bear
the original signature of the issuing insurance agent.
7.6 Unearned Premiums
If this Deed of Trust is foreclosed, Beneficiary may at
its discretion cancel any of the insurance policies
required under this Section and apply any unearned
premiums to the Indebtedness.
7.7 Forced Placement
If Grantor fails to comply with the requirements of
this Section, Beneficiary may, at its discretion,
procure any required insurance. Any premiums paid for
such insurance, or the allocable portion of any premium
paid by Beneficiary under a blanket policy for such
insurance, shall be a demand obligation under this Deed
of Trust, and any unearned premiums under such
insurance shall comprise Insurance Proceeds and
therefore a portion of the Property.
8. INSURANCE AND CONDEMNATION PROCEEDS
8.1 Adjustment of Insurance Claims and Compromise of
Condemnation Awards
Grantor may settle any insurance claim or condemnation
proceeding if the effect of the casualty or the
condemnation may be remediated for $50,000 or less. If
a greater sum is required, Grantor may not settle any
such claim or proceeding without the advance written
consent of Beneficiary. If a Default exists, Grantor
may not settle any insurance claim or condemnation
proceeding without the advance written consent of
Beneficiary.
8.2 Direct Payment to Beneficiary of Proceeds
If the Insurance Proceeds received in connection with a
casualty or the Condemnation Proceeds received in
respect of a condemnation exceed $50,000, or if there
is a Default, then such proceeds shall be paid directly
to Beneficiary. Beneficiary shall have the right to
endorse instruments that evidence proceeds which it is
entitled to receive directly.
8.3 Availability to Grantor of Proceeds
Grantor shall have the right to use the Insurance
Proceeds or the Condemnation Proceeds to rebuild the
Improvements following a casualty, or the remedy the
effect on the Real Property of any condemnation, if the
amount received is less than the Threshold Number,
provided (a) no condition of Default then exists, (b)
no Default with respect to any payment obligation under
any of the Loan Documents shall have occurred during
the preceding twelve months, (c) no nonmonetary default
shall have occurred, been noticed and remained uncured
beyond the applicable cure period and (d) the proceeds
received by Beneficiary, together with any additional
funds deposited with Beneficiary by Grantor, are then
sufficient, in Beneficiary's discretion, to restore the
Improvements to their condition before the casualty, or
to remedy the effect on the Real Property of the
condemnation. Beneficiary may condition disbursements
on approval of plans and specifications, minimum
disbursement requirements, submittal of certificates of
occupancy and other appropriate evidence of completion,
updating of Beneficiary's mortgagee title insurance
coverage to insure the absence of mechanics' or
materialmen's liens, disbursement on a percentage of
completion basis with a ten percent holdback on all
disbursements pending final completion, and other
customary safeguards for construction lenders. All
transactional expenses shall be paid by Grantor. If
the amount received in respect of a casualty or
condemnation equals or exceeds the Threshold Number,
then such proceeds may, at Grantor's option, be used to
rebuild or to remedy subject to all of the provisions
and procedures described above, but only if the Loan-to-
Value ratio of the Property on completion will be 75%
or less, as determined by Beneficiary based on its
appraisal review, as determined by repeating the
appraisal procedure described in Section 4.2.1 of the
Commitment. If necessary, Grantor shall make a
prepayment of the Loan, without premium, sufficient to
achieve this Loan-to-Value ratio. The independent fee
appraisal shall be at Grantor's expense, and Grantor
shall pay Beneficiary an administrative fee of $2,500
in connection with its review. Beneficiary may require
that Grantor deposit $10,000 with Beneficiary as
security for these expenses or may pay the fee
appraiser's and administrative fees from the proceeds
at its sole discretion.
Unless Grantor has the right to use the Insurance
Proceeds or the Condemnation Proceeds under the
foregoing paragraph, Beneficiary may, in its sole and
absolute discretion, either apply them to the Loan
balance or disburse them for the purposes of repair and
reconstruction, or to remedy the effects of the
condemnation. No prepayment premium will be charged on
amounts applied to reduce the principal balance of the
Loan.
9. ESCROW FUND
Grantor shall pay the Monthly Escrow Payment on the first
day of every month, commencing January 1, 1997. Any Monthly
Escrow Payment received after the tenth day of the month in
which it is due shall be subject to a late charge of five
percent, which shall not be applied to the Escrow Fund.
Beneficiary shall hold Monthly Escrow Payments in a fund
from which Beneficiary will pay Escrow Expenses that
Beneficiary has anticipated will become payable on a regular
basis during the Loan's term, and on which Beneficiary has
based its determination of the Monthly Imposition
Requirement, the Monthly Insurance Premium Requirement and
the Monthly Reserve Requirement. The Escrow Fund will be
maintained as an accounting entry in Beneficiary's general
account, where it may be commingled with Beneficiary's other
funds. Beneficiary may reanalyze the projected Escrow
Expenses from time to time and shall advise Grantor of any
change in the amount of the Monthly Escrow Payment Grantor
hereby grants to Beneficiary a security interest in the
Escrow Fund and agrees that, upon the foreclosure of the
Deed of Trust, the delivery of a deed in lieu of
foreclosure, or the payoff of the Loan, Beneficiary may
apply amounts in the Escrow Fund, net of accrued Escrow
Expenses, to the Indebtedness. Beneficiary shall remit any
amounts in excess of the Indebtedness to Grantor.
10. DEFAULT
10.1 Existence of Default
A Default shall exist immediately upon the occurrence
of any of the acts, omissions or circumstances
specified in Subsection 10.2 or in Subsection 10.4.
Upon the occurrence of any of the acts, omissions or
circumstances specified in Subsection 10.3, Beneficiary
may deliver written Notice to Grantor of the existence
of such an act, omission or circumstance, and that such
an act, omission or circumstance shall, if uncured
within the Conditional Grace Period, constitute a
Default under the Loan Documents. A Default shall
exist if the act, omission or circumstance has not been
cured prior to expiration of the Conditional Grace
Period, or if, following such Notice, Grantor either
ceases to pursue the cure of such an act, omission or
circumstance with diligence, or repudiates its
obligation to effect such a cure.
10.2 Monetary Defaults
A monetary default shall exist upon any of the
following:
(a) Monthly Principal and Interest Payments
Grantor's failure to pay, or to cause to be paid,
any regular monthly payment of principal and
interest due under the Notes, or any required
Monthly Escrow Payment, so that Beneficiary
receives the payment on or before the tenth day of
the month in which the payment is due;
(b) Matured Indebtedness
Grantor's failure to pay, or to cause to be paid,
the Indebtedness when the Loan matures by
acceleration under Section 13, because of a
transfer or encumbrance under Section 16, or by
lapse of time;
(c) Demand Obligations
Grantor`s failure to pay, or to cause to be paid,
within five Business Days of Beneficiary's written
demand, any other amount due under this Deed of
Trust or any of the other Loan Documents;
10.3 Curable Nonmonetary Default
A curable nonmonetary default shall exist upon any of
the following:
(a) Entry of a Material Judgment
The entry of any judgment against Grantor or any
other Obligor, if the judgment may materially and
adversely affect the value, use or operation of
the Real Property;
(b) Tax Lien
The filing of any federal, state or local tax lien
against Grantor or any other Obligor, or against
the Real Property.
(c) Failure of Warranty
Any representation made in Section 5 or warranted
in any other Loan Document shall become untrue or
misleading in any material respect.
(d) Other Defaults
Grantor's failure to observe any promise or
covenant made in this Deed of Trust or any other
Loan Document, if the failure is not described in
Subsection 10.2, in Subsection 10.4, or elsewhere
in this Subsection 10.3.
10.4 Incurable Nonmonetary Default
An incurable nonmonetary default shall exist upon any
of the following:
(a) Material Untruth or Misrepresentation
Beneficiary`s discovery that any representation
made by Grantor or by any other Obligor in any
Loan Document in connection with the Loan was
untrue or misleading in any material respect at
the time it was made.
(b) Voluntary Bankruptcy Filing
The filing by Grantor or by any other Obligor of a
petition in bankruptcy or for relief from
creditors under any present or future law that
affords general protection from creditors.
(c) Involuntary Bankruptcy or Similar Filing
Grantor or any other Obligor becomes the subject
of an involuntary petition in bankruptcy or of any
other action that may result in a composition of
its debts, that may provide for the marshaling of
its assets for the satisfaction of Grantor's or
such other Obligor's debts, or that may result in
the judicially ordered sale of the its assets for
the purpose of satisfying its obligations to
creditors, unless a motion for the dismissal of
the petition or other action is filed within ten
days and results in its dismissal within sixty
days of the filing of the petition or other
action.
(d) Insolvency
An adjudication that Grantor or any other Obligor
is insolvent.
(e) Receivership
The appointment of a receiver or trustee to take
possession of any of the assets of Grantor or of
any other Obligor unless a motion for the
dismissal of the appointment is filed within ten
days and results in dismissal of the receiver or
trustee within thirty days of the filing of the
petition or other action.
(f) Levy or Attachment
The taking or seizure of any material portion of
the Property under levy of execution or attachment
unless a motion for the dismissal of the petition
or other action is filed within ten days and
results in its dismissal within ten days of the
filing of the petition or other action.
(g) Death, Dissolution or Liquidation
The dissolution or liquidation of any Obligor that
is not a natural person, or the cessation of its
legal existence shall cease, or the death of any
Obligor who is a natural person (unless the
dissolution, liquidation, cessation or death
results in a Permitted Transfer).
(h) Abandonment
Grantor's abandonment of the Real Property.
(i) Impairment of the Lien by Legal Requirement
The promulgation by any Governmental Authority of
a Legal Requirement, or a ruling by a court of
competent jurisdiction, if the effect of the Legal
Requirement or ruling is to make the payment of
the Indebtedness unlawful or usurious, to prevent
Grantor or any other Obligor from legally
performing any material obligation under any Loan
Documents, to materially impair the right of
Beneficiary to accelerate the Indebtedness upon
the occurrence of a material Default, or to
materially impair the right of Beneficiary, upon
the failure of Grantor to pay the Indebtedness at
its maturity through acceleration or lapse of
time, to cause the sale of the Real Property and
the to apply the proceeds of the sale to the
Indebtedness.
(j) Impairment of Yield through Taxation
The promulgation of any Legal Requirement that
taxes the Deed of Trust so that the yield on the
Indebtedness would be reduced, if Grantor may
neither lawfully pay the tax nor lawfully
reimburse Beneficiary for its payment.
(k) Proceeding to Contest Lien
Grantor's institution of any proceeding to contest
the validity of Beneficiary's lien on the
Property.
11. RIGHT TO CURE
Upon Default or upon the failure of Grantor, following a
notice given under Subsection 10.3, to diligently pursue the
cure of any act, omission or circumstance that may cause
Default, Beneficiary shall have the right to cure the
Default or the act, omission or circumstance. The expenses
of doing so shall be part of the Indebtedness, and Grantor
shall pay them to Beneficiary on demand.
12. CONTEST RIGHTS
Grantor may secure the right to contest Impositions and
mechanics' or materialmen's liens, through appropriate
proceedings conducted in good faith, by depositing with
Beneficiary an amount equal to 125% of the amount of the
Imposition or the lien, or by depositing a bond or other
security acceptable to Beneficiary in its sole discretion.
If the contest of the related Imposition or lien is
unsuccessful, Beneficiary shall use the amount deposited, or
the proceeds of the bond or other security, to pay the
Imposition or to satisfy the obligation from which the lien
has arisen. Any surplus shall be refunded to Grantor.
13. DUE ON TRANSFER OR ENCUMBRANCE
Except as expressly permitted by the terms of the Loan
Agreement, upon the sale of any portion of the Real
Property, or upon any other conveyance, transfer or vesting
of any direct or indirect interest in Grantor or the
Property, including (i) the direct or indirect transfer of,
or the granting of a security interest in, the ownership of
Grantor, (ii) any encumbrance (other than a Permitted
Encumbrance) of the Real Property and (iii) the granting of
any security interest in the Property, the Indebtedness
shall, at Beneficiary's option, become immediately due and
payable without notice, unless the sale, conveyance,
transfer or vesting is a Permitted Transfer.
14. PERMITTED TRANSFER
14.1 Certain Transfers of Limited Partnership Interests
Transfers of limited partnership interests in Grantor
that do not result in a loss of American Industrial
Properties REIT's majority control of Grantor shall
constitute Permitted Transfers.
14.2 Transfer to an Approved Purchaser
Grantor shall have the right, on one occasion during
the term of the Loan, to sell or transfer the Property
(together with all other real and personal property
then securing the Notes) in a transaction approved by
Beneficiary. Beneficiary agrees to approve a transfer
if the following conditions are satisfied:
(a) No Default
No Default shall exist, and no act, omission or
circumstance shall exist which, if uncured
following notice and the passage of time, would
become a Default.
(b) Request and Supporting Materials
Beneficiary shall receive a written request for
its approval at least sixty days in advance notice
of the proposed transfer. The request shall
specify the identity of the proposed transferee
and the terms of the transaction, and shall be
accompanied by the financial statements, tax
returns, and organizational documents of the
proposed transferee and its principals.
(c) Criteria to be Considered
The financial strength, credit history and
demonstrated property management expertise of the
proposed transferee and its principals shall be
satisfactory to Beneficiary in its sole
discretion. Beneficiary expressly reserves the
right to withhold its approval of the proposed
transfer if the proposed transferee or any of its
principals is or has been the subject of any
bankruptcy, insolvency, or similar proceeding.
(d) Assumption Agreement
Under the terms of the proposed transfer, the
proposed transferee shall assume the Loan, without
modification, under the terms of an assumption
agreement and additional documentation
satisfactory to Beneficiary in form and substance.
(e) Retention of Recourse Obligations
Under the terms of the assumption agreement and
additional documentation, liability for Recourse
Obligations arising after the date of the transfer
and assumption shall be assumed by the principals
of the proposed transferee, and liability for
Recourse Obligations arising before or in
connection with the transfer shall be retained by
those liable for them before the transfer.
(f) Title Insurance Endorsement
Grantor shall agree to provide an endorsement to
Beneficiary's mortgagee title insurance policy,
insuring the continued validity and priority of
the Deed of Trust following the assumption.
(g) Assumption Fee
Beneficiary shall receive an assumption fee of
1.25 percent of the outstanding balance of the
Loan at the time of the sale or transfer, and
Grantor shall agree to reimburse Beneficiary's out-
of-pocket expenses incurred in connection with the
proposed transfer, including title, recording, and
attorneys' fees, regardless of whether the
transfer is consummated.
15. NOTICE OF ASSIGNMENT OF LEASES AND RENTS
Under the Assignment of Leases and Rents, Grantor has
assigned to Beneficiary, and to its successors and assigns,
all of Grantor's right and title to, and interest in, the
Leases, including all rights under the Leases and all
benefits to be derived from them. The rights assigned
include all authority of Grantor to modify or terminate
Leases, or to exercise any remedies, and the benefits
assigned include all Rents. This assignment is present and
absolute, but under the terms of the Assignment of Leases
and Rents, Beneficiary has licensed Grantor to collect and
use the Rents, and to exercise the rights assigned in this
paragraph, in any way that is consistent with its
obligations under the Loan Documents, under its terms. This
license, however, expires upon the maturity of the Loan by
acceleration or by lapse of time. Beneficiary may terminate
the license by written notice upon either (i) Default or
(ii) the occupancy of more than one-half of the leasable
space in the Improvements by a single tenant that is the
subject of a petition under the Bankruptcy Code, that has
threatened to file such a petition, or whose insolvency is
imminent. If the license to collect rents is terminated
under clause (ii) and there is no Default, then Beneficiary
shall collect the Rent directly, apply it to that portion of
the Indebtedness then due and payable, and promptly remit
any excess amount to Grantor. Grantor shall promptly remit
to Beneficiary any Rents it receives after the expiration or
termination of Grantor's license to collect the Rents.
16. ACCELERATION
Under the terms of the Notes, if a Default exists,
Beneficiary may, at its option, without Notice to Grantor,
declare the Indebtedness to be immediately due and payable.
17. RIGHTS OF ENTRY AND TO OPERATE
17.1 Entry on Property
If a Default exists, Beneficiary may without notice
enter upon any Real Property and take exclusive
possession thereof and of all books, records and
accounts pertaining thereto, all without notice and
without being guilty of trespass. If Grantor remains
in possession of all or any part of the Property after
Default and without Beneficiary's prior written
consent, Beneficiary may, without notice to Grantor,
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
writ of restitution.
17.2 Operation of Property
If a Default exists, Beneficiary may hold, lease,
manage, operate or otherwise use or permit the use of
the Real Property, either itself or by other persons,
firms or entities, in such manner, for such time and
upon such other terms as Beneficiary may deem to be
prudent and reasonable under the circumstances (making
such repairs, alterations, additions and improvements
thereto and taking any and all other action with
reference thereto, from time to time, as Beneficiary
deems necessary or desirable), and apply all Rents and
other amounts collected by Beneficiary in accordance
with the provisions of the Assignment of Leases and
Rents.
18. RECEIVERSHIP
If a Default exists, Beneficiary may apply to a court of
competent jurisdiction for the appointment of a receiver of
all or any part of the Property, whether or not the value of
the Property exceeds the Indebtedness, whether or not waste
or deterioration of the Real Property has occurred, and
whether or not other arguments based on equity would justify
the appointment. Grantor irrevocably consents to such an
appointment. Any such receiver shall have all the rights
and powers customarily given to receivers in Texas,
including the rights and powers granted to Beneficiary by
this Deed of Trust, the power to maintain, lease and operate
the Real Property on terms approved by the court, and the
power to collect the Rents and apply them to the
Indebtedness or otherwise as the court may direct. Once
appointed, a receiver may at Beneficiary's option remain in
place until the Indebtedness has been paid in full.
19. FORECLOSURE
Upon the existence of Default, Beneficiary may immediately
proceed to foreclose the lien of this Deed of Trust against
all or part of the Real Property by foreclosure sale in
accordance with the laws of Texas.
Specifically, Beneficiary may, by and through Trustee, or
otherwise, sell or offer for sale the Property in such
portions, order and parcels as Beneficiary may determine,
with or without having first taken possession of the
Property, to the highest bidder for cash at public auction.
Beneficiary shall give legal notice of the time, place and
terms of sale by posting or causing to be posted written or
printed notice at least twenty-one (21) days before the date
of the sale. The notice shall be posted at the courthouse
door, or in another area in the courthouse designated for
such public notices. In addition, Beneficiary shall file
the notice with the County Clerk of each county in which all
or a portion of the Property may be situated. The notice
may be posted and filed by the Trustee acting, or by any
person acting for him or her. The holder of the
Indebtedness and Beneficiary of the Obligations (if
different than the holder of the Indebtedness) shall also,
at least twenty-one (21) days before the date of sale, serve
written or printed notice of the proposed sale by certified
mail on each person who, according to the records of
Beneficiary, is obligated to pay all or part of the
Indebtedness. This notice shall be enclosed in an envelope,
with postage prepaid, addressed to that person at his or her
most recent address according to the records of Beneficiary
or other holder of the Notes, and deposited in a post office
or official depository under the care and custody of the
United States Postal Service. The affidavit of any person
having knowledge of the facts to the effect that such
service was completed shall be prima facie evidence of the
fact of service. The sale will take place at the county
courthouse of Dallas County or, if the Real Property is
located in more than one county, at the county courthouse in
any of counties designated in the notices of sale provided
for in this Section. No Personal Property need be present
at the sale in order to be sold. The sale will take place
at the area of the courthouse designated from time to time
by the commissioners court (or, if not so designated, at the
courthouse door) on the first Tuesday of any month between
the hours of 10.00 a.m. and 4.00 p.m. The sale shall begin
within three (3) hours of the time designated in the notice
of sale as the earliest time at which such sale will occur.
Beneficiary may accomplish the foreclosure in any manner
permitted by Chapter 51 of the Property Code of the State of
Texas relating to the sale of real estate or by Chapter 9 of
the Texas Business and Commerce Code relating to the sale of
collateral after default by a debtor, as they may be
amended, or in any manner permitted under any successor
statute. At any sale under this Section, the Trustee need
neither physically attend nor have constructive possession
of the Property. Upon completion of the sale, Grantor shall
immediately relinquish possession of the Property to the
Trustee on demand.
Each instrument of conveyance executed by the Trustee shall
contain a general warranty of title, binding upon Grantor
and shall, to the fullest extent permitted by applicable
law, convey the Rents.
Each recital contained in any instrument of conveyance made
by Trustee will conclusively establish the truth and
accuracy of the matters recited, including, without
limitation, nonpayment of the Indebtedness, nonpayment and
nonperformance of the Obligations, advertisement and conduct
of such sale, and appointment of any successor Trustee.
Any and all prerequisites to the validity of any instrument
of conveyance will be rebuttably presumed to have been
performed.
The receipt of Trustee (or of Beneficiary) will be
sufficient discharge to the purchaser or purchasers for his
or their purchase money, and such purchaser or purchasers,
or his or their assigns or personal representatives, will
not, after paying such purchase money and receiving such
receipt of Trustee (or Beneficiary), be responsible for the
proper application of the purchase money or be in any way
answerable for its loss or misapplication.
To the fullest extent allowed by law, Grantor will be
completely and irrevocably divested of all of its right,
title, interest, claim and demand whatsoever, either at law
or in equity, in and to the property sold, and such sale
will be a perpetual bar, both at law and in equity, against
Grantor and against all other persons claiming or to claim
the property sold or to any part thereof by, through or
under Grantor; and
To the extent and under such circumstances as are permitted
by law, Beneficiary may be a purchaser at any such sale.
20. WAIVERS
To the maximum extent permitted by law, Grantor irrevocably
and unconditionally WAIVES and RELEASES any present or
future rights (a) of redemption, (b) that may exempt the
Property from any civil process, (c) to appraisal or
valuation of the Property, (d) to extension of time for
payment, (e) that may subject Beneficiary's exercise of its
remedies to the administration of any decedent's estate or
to any partition or liquidation action, (f) to any homestead
exemption and (g) that in any way would delay or defeat the
right of Beneficiary to cause the sale of the Real Property
for the purpose of satisfying the Indebtedness. Grantor
agrees that the price paid at a lawful foreclosure sale,
whether by Beneficiary or by a third party, and whether paid
through cancellation of all or a portion of the Indebtedness
or in cash, shall conclusively establish the value of the
Real Property.
Grantor expressly WAIVES and RELINQUISHES any right or
remedy which it may have or be able to assert by reason of
the provisions of Chapter 34 of the Business and Commerce
Code of the State of Texas pertaining to the rights and
remedies of sureties. To the maximum extent permitted by
applicable law, Grantor hereby WAIVES and RELEASES all
rights, remedies, claims and defenses based upon or related
to Sections 51.003, 51.004 and 51.005 of the Property Code
of the State of Texas to the extent the same pertain or may
pertain to any enforcement of this Deed of Trust.
21. EXCULPATION CLAUSE AND RECOURSE ("CARVEOUT") OBLIGATIONS
Beneficiary agrees that it shall not seek to enforce any
monetary judgment against Grantor except through recourse to
the Property and any other property now or hereafter
securing all or any part of the Indebtedness, unless the
obligation from which the judgment arises is a Recourse
Obligation. Recourse Obligations include Beneficiary's
costs, expenses (including reasonable attorneys' fees),
losses and actual damages caused by (i) waste, not including
ordinary wear and tear, unless Grantor fails to maintain the
Property with ordinary care; (ii) fraud or written material
misrepresentation; (iii) failure to pay taxes, assessments,
ground rent or any other lienable impositions as required
under the Loan Documents; (iv) misapplication of tenant
security deposits, insurance proceeds or condemnation
proceeds, or the unavailability to Beneficiary of
condemnation proceeds because a lease of the Real Property
grants a tenant the right to a portion of the owner's award
(unless that portion is specifically allocated to the
tenant's interest by the condemning authority); (v) failure
while in monetary default to pay to Beneficiary all rents,
income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Notes mature by acceleration or lapse of
time. Grantor may also assume recourse liability under Loan
Documents or other agreements that expressly provide for
such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, Grantor shall have personal liability for the
entire indebtedness if Grantor (a) voluntarily transfers or
encumbers the Property in violation of the Loan Documents,
or (b) files a voluntary petition for reorganization under
the Bankruptcy Code and has not offered, prior to the
filing, to enter into Beneficiary's choice of either an
agreement to permit an uncontested foreclosure or an
agreement to deliver a deed in lieu of foreclosure, within
sixty days of Beneficiary's acceptance of the offer.
Following Beneficiary's acceptance of such an offer, default
by Grantor shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Beneficiary, on the release of any obligor from
any recourse obligation, or on any other concession.
22. SECURITY AGREEMENT AND FIXTURE FILING
22.1 Security Agreement
This Deed of Trust shall be self-operative and shall
constitute a Security Agreement pursuant to the
provisions of the Texas Uniform Commercial Code (the
"Code") with respect to those items comprising Property
that may be subject to a security interest under the
Code. Grantor, as debtor, hereby grants Beneficiary,
as secured party, a security interest in those items
and in all related additions, replacements,
substitutions and proceeds, for the purpose of securing
the Indebtedness. Grantor hereby agrees to execute and
deliver on demand, and irrevocably constitutes and
appoints Beneficiary the attorney-in-fact of Grantor,
to execute, deliver and, if appropriate, to file with
the appropriate filing officer or office, such security
agreements, financing statements or other instruments
as Beneficiary may require in order to create, perfect,
or continue this security interest. Grantor shall pay
all related filing fees and costs, all reasonable costs
and expenses of any record searches (or their
continuations), as Beneficiary may reasonably require.
Without the prior written consent of Beneficiary,
Grantor shall not create or suffer the creation of any
other lien on or security interest in any of the
Property subject to the security interest. Upon
Default, Beneficiary shall have the rights and remedies
of a secured party under the Code as well as all other
rights and remedies available at law or in equity, and,
at Beneficiary's option, Beneficiary may also invoke
the remedies provided elsewhere in this Deed of Trust
as to such property. Grantor and Beneficiary agree
that the rights granted to Beneficiary as secured party
under this Section 21 are in addition to rather than a
limitation on any of Beneficiary's other rights under
this Deed of Trust with respect to the Personal
Property. No failure to mention any item in a
financing statement shall limit the scope of Grantor's
assignment of any Property, impair the priority of
Beneficiary`s lien on any Personal Property, or alter
Beneficiary's rights to Insurance Proceeds and
Condemnation Proceeds, except to the extent that a
court holds that mention of the item in the Code
records was required in order for Beneficiary's
interest to enjoy priority over the interests of third
parties.
22.2 Fixture Filing
This Deed of Trust constitutes a financing statement
filed as a fixture filing in the Official Records of
the County Recorder of Dallas County, Texas with
respect to any and all fixtures comprising Property.
The "debtor" is AIP Properties #3, L.P., a limited
partnership organized under Delaware law, the "secured
party" is Life Investors Insurance Company of America,
a corporation organized under the laws of Iowa, the
collateral is as described in Section 22.1 above and
the granting clauses in this Deed of Trust, and the
addresses of the debtor and secured party are the
addresses stated in Subsection 25.10 of this Deed of
Trust for notices to such parties.
23. ENVIRONMENTAL MATTERS
23.1 Representations
Grantor represents as follows:
(a) No Hazardous Substances
To the best of Grantor's knowledge following due
inquiry as a duly diligent property owner, and
except as disclosed in the ESA, the Real Property
has been, and is, free of contamination from
Hazardous Substances, and no Hazardous Substances
have been released on or about the Real Property.
(b) Compliance with Environmental Laws
The Real Property and its current use and
presently contemplated uses comply with all
Environmental Laws and, in connection with the
ownership, operation and use of the Real Property,
all necessary permits, licenses, authorizations,
and other consents and approvals have been
obtained, and all necessary notices, publications,
and filings have been made and given, with respect
to the storage, use, and disposal of any Hazardous
Substances in, on, or about the Real Property.
(c) No Actions or Proceedings
There is no present or, to the best of Grantor's
knowledge following due inquiry as a duly diligent
property owner, no past or threatened action,
proceeding or investigation by any governmental
authority or agency related to any suspected or
actual violation of any Environmental Law with
respect to, or the presence of any Hazardous
Material on, the Real Property.
23.2 Covenants
Grantor covenants as follows:
(a) Compliance with Environmental Laws
Grantor shall, and Grantor shall cause all
employees, agents, contractors, and tenants of
Grantor and any other persons present on or
occupying the Real Property, to keep and maintain
the Real Property in compliance with all
Environmental Laws.
(b) Notices, Actions and Claims
Grantor shall immediately advise Beneficiary in
writing of (i) any notices from any governmental
or quasi-governmental agency or authority of
violation or potential violation of any
Environmental Law received by Grantor, (ii) any
and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted,
completed or threatened pursuant to any
Environmental Law, (iii) all claims made or
threatened by any third party against Grantor or
the Real Property relating to damage,
contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Substances,
and (iv) discovery by Grantor of any occurrence or
condition on any real property adjoining or in the
vicinity of the Real Property that could cause the
Real Property to become contaminated by or with
Hazardous Substances.
23.3 Beneficiary's Right to Control Claims
Beneficiary shall have the right (but not the
obligation) to join and participate in, as a party if
it so elects, any legal proceedings or actions
initiated in connection with any Hazardous Substances
and to have its related and reasonable attorneys' and
consultants' fees paid by Grantor upon demand.
23.4 Indemnification
Grantor shall be solely responsible for, and shall
indemnify, defend, and hold harmless Beneficiary,
Trustees, and their respective directors, officers,
employees, agents, successors and assigns from and
against, any loss, damage, cost, expense or liability
of whatever kind or nature, known or unknown,
contingent or otherwise, directly or indirectly arising
out of or attributable to the use, generation, storage,
release, threatened release, discharge, disposal, or
presence (whether prior to or after the date of this
Deed of Trust) of Hazardous Substances on, in, under or
about the Real Property (whether by Grantor, a
predecessor in title, any tenant, or any employees,
agents, contractor or subcontractors of any of the
foregoing or any third persons at any time occupying or
present on the Real Property), including, without
limitation: (i) personal injury; (ii) death; (iii)
damage to property; (iv) all consequential damages; (v)
the cost of any required or necessary repair, cleanup
or detoxification of the Real Property, including the
soil and ground water thereof, and the preparation and
implementation of any closure, remedial or other
required plans; (vi) damage to any natural resources;
and (vii) all reasonable costs and expenses incurred by
Beneficiary or Trustee in connection with clauses (i)
through (vi), including but not limited to reasonable
attorneys' and consultants' fees; provided, however,
that nothing contained in this Section shall be deemed
to preclude Grantor from seeking indemnification from,
or otherwise proceeding against, any third party
including, without limitation, any tenant or
predecessor in title to the Real Property. The
covenants, agreements, and indemnities set forth in
this Section shall be binding upon Grantor and its
heirs, successors and assigns, and shall survive
repayment of the Indebtedness, foreclosure of the
Security, and Grantor's granting of a deed in lieu of
foreclosure of the Security. Any costs or expenses
incurred by Beneficiary or Trustee for which Grantor is
responsible or for which Grantor has indemnified
Beneficiary shall be paid to Beneficiary on demand,
with interest at the Default Rate from the date
incurred by Beneficiary until paid in full, and shall
be secured by this Deed of Trust. Without the prior
written consent of Beneficiary, Grantor shall not enter
into any settlement agreement, consent decree, or other
compromise in respect to any claims relating to
Hazardous Substances.
23.5 Environmental Audits
At such times as Beneficiary reasonably determines that
an environmental audit of the Real Property for the
presence of Hazardous Substances is necessary in order
to determine whether the value of the Real Property has
been or may in the future be impaired by the presence
of Hazardous Substances on, about or under the Real
Property (but no more often than annually unless
Beneficiary has reason to believe that Hazardous
Substances may be present), Grantor shall retain, upon
request of Beneficiary, or Beneficiary may retain
directly, at the sole cost and expense of Grantor, a
licensed geologist, industrial hygienist or an
environmental consultant (the "Environmental
Consultant") acceptable to Beneficiary to conduct an
environmental audit of the Real Property. Grantor
shall afford any person conducting an environmental
audit access to the Real Property and all materials
reasonably requested in connection with the
environmental audit. In light of the possible passage
of title to Beneficiary as a result of Default, any
requirement of an environmental audit by Beneficiary
shall be deemed reasonable if a Default exists. Such a
requirement shall also be deemed reasonable if
Beneficiary has received notice of the likely existence
of Hazardous Substances on, about or under the Real
Property. Grantor shall pay the actual and reasonable
cost and expenses of any environmental audit obtained
by Beneficiary within five days of written demand.
Grantor shall at Beneficiary's request comply, at its
sole cost and expense in the most commercially
reasonable manner determined by Grantor, with all
recommendations contained in the environmental audit
required to bring the Real Property into compliance
with all Environmental Laws, or for additional testing
and studies to further determine the location, quantity
and types of Hazardous Substances detected by an
environmental audit.
24. CONCERNING THE TRUSTEE
24.1 No Liability
Trustee will not be liable for any error of judgment or
act, or be otherwise responsible or accountable under
any circumstances. If the Trustee or anyone acting by
virtue of Trustee's powers enters the Real Property,
the Trustee will not be personally liable for debts
contracted or for liability or damages incurred in the
management or operation of the Real Property. Trustee
will have the right to rely on any instrument, document
or signature authorizing or supporting any action taken
or proposed to be taken by Trustee or believed by
Trustee in good faith to be genuine. Trustee will be
entitled to reimbursement for expenses incurred by
Trustee in the performance of Trustee's duties and to
reasonable compensation for services rendered. Grantor
shall, from time to time, pay compensation due Trustee
under this Deed of Trust and reimburse Trustee for and
save and hold Trustee harmless from and against any and
all loss, cost, liability, damage and expense
whatsoever incurred by Trustee in the performance of
Trustee's duties.
24.2 Retention of Money
All money received by Trustee must, until used or
applied, be held in trust for the purposes for which it
was received, but need not be segregated in any manner
from any other money (except to the extent required by
law) and Trustee will have no liability for interest on
any money received.
24.3 Successor Trustees
Trustee may resign by giving of notice of such
resignation in writing to Beneficiary. If Trustee
dies, resigns or becomes disqualified from acting in
the execution of this Trust or fails or refuses to
exercise the same when requested by Beneficiary so to
do or if for any reason and without cause Beneficiary
prefers to appoint a substitute trustee to act instead
of the original Trustee, or any prior successor or
substitute trustee, Beneficiary will have full power to
appoint a substitute trustee and, if preferred, several
substitute trustees in succession who shall succeed to
all the estates, rights, powers and duties of the
Trustee.
24.4 Succession Instruments
Any new Trustee appointed will, without any further
act, deed or conveyance, become vested with all the
estates, properties, rights, powers and trusts of
Trustee's predecessor. Upon the written request of
Beneficiary or of any successor trustee, Trustee
ceasing to act shall execute and deliver an instrument
transferring to such successor trustee all the estates,
properties, rights, powers and trusts of Trustee so
ceasing to act, and shall duly assign, transfer and
deliver any of the property and money held by Trustee
to the successor trustee so appointed in Trustee's
place.
24.5 Performance of Duties by Agents
Trustee may authorize one or more parties to act on
Trustee's behalf to perform Trustee's ministerial
functions, including, without limitation, the
transmittal and posting of any notices.
25. MISCELLANEOUS
25.1 Survival of Obligations
Each and all of the Obligations shall survive the
execution and delivery of the Loan Documents and will
continue in full force and effect until the
Indebtedness and the Obligations have been paid and
satisfied in full.
25.2 Further Assurances
Grantor, upon the request of Beneficiary or Trustee,
shall complete, execute, acknowledge, deliver and
record or file such further instruments and do such
further acts as may be necessary, desirable or proper
to carry out more effectively the purposes of this Deed
of Trust, to subject any property intended to be
covered by this Deed of Trust to the liens and security
interests it creates, to place third parties on notice
of those liens and security interests, or to correct
any defects which may be found in any Loan Document.
Grantor irrevocably appoints Beneficiary as its agent
to complete, execute, deliver and record or file all
such instruments.
25.3 Recording and Filing
Grantor shall cause this Deed of Trust and all
amendments, supplements, and substitutions to be
recorded, filed, re-recorded and refiled in such manner
and in such places as Beneficiary may reasonably
request. Grantor and will pay all recording filing, re-
recording and refiling taxes, fees and other charges.
25.4 No Waiver
No deliberate or unintentional failure by Beneficiary
to require strict performance by Grantor of any
Obligation shall be deemed a waiver, and Beneficiary
shall have the right at any time to require strict
performance by Grantor of any Obligation.
25.5 Expenses
Grantor shall pay all filing and recording fees, and
all expenses incident to the execution and
acknowledgment of this Deed of Trust, any supplements
or amendments, and any instrument entered into under
Subsection 25.2. Grantor shall pay or reimburse
Beneficiary, upon demand, for all costs and expenses,
including appraisal and reappraisal costs of the
Property and reasonable attorneys' and legal
assistants' fees, which Beneficiary may incur in
connection with enforcement proceedings hereunder, and
reasonable attorneys' and legal assistants' fees
incurred by Beneficiary in any other suit, action,
legal proceeding or dispute of any kind in which
Beneficiary is made a party or appears as party
plaintiff or defendant, affecting the Indebtedness,
this Deed of Trust, or the Property, or required to
protect or sustain the lien of this Deed of Trust.
Grantor shall be obligated to pay (or to reimburse
Beneficiary) for such fees, costs and expenses and
shall indemnify and hold Beneficiary and Trustee
harmless from and against any and all loss, cost,
expense, liability, damage and claims and causes of
action, including reasonable attorneys' fees, incurred
or accruing by reason of Grantor's failure to promptly
repay any such fees, costs and expenses.
25.6 Covenants Running with the Land
All Obligations are intended by the parties to be and
shall be construed as covenants running with the Land.
25.7 Successors and Assigns
All of the terms of the Loan Documents shall apply to,
be binding upon and inure to the benefit of the
successors and assigns of the parties.
25.8 Severability
The Loan Documents are intended to be performed in
accordance with, and only to the extent permitted by,
all applicable Legal Requirements. Any provision of
the Loan Documents that is prohibited or unenforceable
in any jurisdiction shall nevertheless be construed and
given effect to the extent possible. The invalidity or
unenforceability of any provision in a particular
jurisdiction shall neither invalidate nor render
unenforceable any other provision of the Loan Document
in that jurisdiction, and shall not affect the validity
or enforceability of that provision in any other
jurisdiction. If a provision is held to be invalid or
unenforceable as to a particular person or under a
particular circumstance, it shall nevertheless be
presumed valid and enforceable as to others, or under
other circumstances.
25.9 Usury
The parties intend that no provision of the Notes or
the Loan Documents be interpreted, construed, applied,
or enforced so as to permit or require the payment or
collection of interest in excess of the highest rate of
interest (the "Maximum Permitted Rate") permitted to be
paid or collected by applicable law with respect to
this transaction. In this regard, Grantor and
Beneficiary each stipulate and agree that it is their
common and overriding intent to contract in strict
compliance with applicable usury laws. Accordingly,
none of the terms of this Deed of Trust, the Notes or
any of the other Loan Documents shall ever be construed
to create a contract to pay, as consideration for the
use, forbearance or detention of money, interest at a
rate in excess of the Maximum Permitted Rate. Grantor
shall never be liable for interest in excess of the
Maximum Permitted Rate. Therefore, (a) in the event
that the Indebtedness and Obligations are prepaid or
the maturity of the Indebtedness and Obligations is
accelerated by reason of an election by Beneficiary,
unearned interest shall be canceled and, if theretofore
paid, shall either be refunded to Grantor or credited
on the Indebtedness evidenced by the Notes, as
Beneficiary may elect; (b) the aggregate of all
interest and other charges constituting interest under
applicable laws and contracted for, chargeable or
receivable under the Notes and the other Loan Documents
or otherwise in connection with the transaction
contemplated thereby shall never exceed the maximum
amount of interest, nor produce a rate in excess of the
Maximum Permitted Rate and (c) if any excess interest
is provided for, it shall be deemed a mistake, and the
same shall, at the option of the holder of the Notes,
either be refunded to Grantor or credited on the unpaid
principal amount (if any), and the Indebtedness
evidenced by the Notes shall be automatically reformed
so as to permit only the collection of the interest at
the Maximum Permitted Rate. Furthermore, if any
provision of the Notes or any of the other Loan
Documents is interpreted, construed, applied, or
enforced, in such a manner as to provide for interest
in excess of the Maximum Permitted Rate, then the
parties intend that such provision automatically shall
be deemed reformed nunc pro tunc so as to require
payment only of interest at the Maximum Permitted Rate.
If, for any reason whatsoever, interest paid or
received during the full term of the applicable
indebtedness produces a rate which exceeds the Maximum
Permitted Rate, then the amount of such excess shall be
deemed credited nunc pro tunc in reduction of the then
outstanding principal amount of the Indebtedness,
together with interest at such Maximum Permitted Rate.
Beneficiary shall credit against the principal of such
Indebtedness (or, if such Indebtedness shall have been
paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be
necessary to cause the interest paid to produce a rate
equal to the Maximum Permitted Rate. All sums paid or
agreed to be paid to Beneficiary for the use,
forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full
term of the applicable indebtedness, so that the
interest rate is uniform throughout the full term of
such indebtedness. In connection with all calculations
to determine the Maximum Permitted Rate, the parties
intend that all charges be excluded to the extent they
are properly excludable under applicable usury laws, as
they from time to time are determined to apply to this
transaction. The provisions of this Section shall
control all agreements, whether now or hereafter
existing and whether written or oral, between Grantor
and Beneficiary.
25.10 Entire Agreement.
The Loan Documents contain the entire agreements
between the parties relating to the financing of the
Real Property, and all prior agreements which are not
contained in the Loan Documents, other than the
Indemnification Against Unsecured Environmental
Liabilities, are terminated. The Loan Documents
represent the final agreement between the parties and
may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements
between the parties.
The Loan Documents may be amended, revised, waived,
discharged, released or terminated only by a written
instrument or instruments executed by the party against
which enforcement of the amendment, revision, waiver,
discharge, release or termination is asserted. Any
alleged amendment, revision, waiver, discharge, release
or termination that is not so documented shall be null
and void.
25.11 Notices.
All notices demands, consents, approvals and other
communications given pursuant to this Deed of Trust
must be in writing and must be sent by hand, or by
telecopy (with a duplicate copy sent by ordinary mail,
postage prepaid), or by postage prepaid, certified or
registered mail, return receipt requested, or by
reputable overnight courier service, postage prepaid,
addressed to the party to be notified as set forth
below:
if to Beneficiary:
Life Investors Insurance Company of America
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5223
Attn. Mortgage Loan Department
Telecopy Number: (319) 369-2188
if to Grantor:
AIP Properties #3, L.P.
6210 North Beltline, Suite 90
Irving, Texas 75063-2656
Attn: David B. Warner
Telecopy Number: (972) 550-6037
Notices will be deemed given when delivered to
Beneficiary or to Grantor, as applicable (regardless of
whether delivered to the persons stated above to
receive copies), by hand or when a legible copy is
received by telecopier (provided receipt is verified by
telephone confirmation or one of the other permitted
means of giving Notices under this Subsection), or if
mailed, three (3) days after mailing (or on the date of
delivery for overnight courier service), with failure
to accept delivery constituting delivery for this
purpose. The parties agree to use reasonable efforts
to provide the copies of Notices required above, but
delivery of such copies shall not be required for
effective delivery of Notice. Actual notice, however
and from whomever given or received, will always be
effective Notice when received. Beneficiary may change
its address for Notices set forth above by giving at
least ten (10) days' prior Notice of such change in
writing to Grantor. Grantor may change the addresses
for Notices set forth above by giving at least thirty
(30) days' prior Notice of such change in writing to
Beneficiary.
25.12 Counterparts.
This Deed of Trust may be executed in any number of
counterparts, each of which shall be an original, but
all of which together shall constitute but one
instrument.
25.13 Applicable Law.
This Deed of Trust will be interpreted, construed,
applied, and enforced according to, and will be
governed by, the laws of the State of Texas, without
regard to any choice of law principles which, but for
this provision, would require the application of the
law of another jurisdiction and regardless of where
executed or delivered, where payable or paid, where any
cause of action accrues in connection with this
transaction, where any action or other proceeding
involving this Deed of Trust is instituted or pending,
or whether the laws of the State of Texas otherwise
would apply the laws of another jurisdiction.
25.14 Headings and General Application.
The section, subsection, and paragraph headings of this
Deed of Trust are provided for convenience of reference
only and shall in no way affect, modify or define, or
be used in construing, the text of the sections ,
subsections or paragraphs. If the text requires, words
used in the singular shall be read as including the
plural, and pronouns of any gender shall include all
genders.
25.15 Sole Benefit.
This Deed of Trust and the other Loan Documents have
been executed for the sole benefit of Grantor and
Beneficiary and the successors and assigns of
Beneficiary. No other party shall have rights
thereunder or be entitled to assume that the parties
thereto will insist upon strict performance of their
mutual obligations hereunder, any of which may be
waived from time to time. Grantor shall have no right
to assign any of its rights under the Loan Documents to
any party whatsoever.
25.16 Subrogation.
If any or all of the proceeds of the Indebtedness or
Obligations have been used to extinguish, extend or
renew any indebtedness heretofore existing against the
Property or to satisfy any indebtedness or obligation
secured by a lien or encumbrance of any kind (including
liens securing the payment of any Impositions), such
proceeds have been advanced by Beneficiary at Grantor's
request, and to the extent of such funds so used, the
Indebtedness and Obligations in this Deed of Trust
shall be subrogated to and extend to all of the rights,
claims, liens, titles and interests heretofore existing
against the Property pursuant thereto to secure the
indebtedness or obligation so extinguished, paid,
extended or renewed, and the rights, claims, liens,
titles and interests of Beneficiary pursuant thereto,
shall not be waived but rather shall be continued in
full force and effect and in favor of Beneficiary and
shall be merged with the lien and security interest
created herein as cumulative security for the repayment
of the Indebtedness and satisfaction of the
Obligations.
25.17 Release of Claims.
Grantor hereby RELEASES, DISCHARGES and ACQUITS forever
Beneficiary and Trustee and their officers, directors,
trustees, agents, employees and counsel (in each case,
past, present or future) from any and all Claims
existing as of the date hereof (or the date of actual
execution hereof by Grantor, if later). As used
herein, the term "Claim" shall mean any and all
liabilities, claims, defenses, demands, actions, causes
of action, judgments, deficiencies, interest, liens,
costs or expenses (including court costs, penalties,
attorneys' fees and disbursements, and amounts paid in
settlement) of any kind and character whatsoever,
including claims for usury, breach of contract, breach
of commitment, negligent misrepresentation or failure
to act in good faith, in each case whether now known or
unknown, suspected or unsuspected, asserted or
unasserted or primary or contingent, and whether
arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of
laws or regulations or otherwise.
25.18 No Partnership.
Nothing contained in the Loan Documents is intended to
create any partnership, joint venture or association
between Grantor and Beneficiary, or in any way make
Beneficiary a co-principal with Grantor with reference
to the Property.
25.19 Payoff Procedures
If Grantor pays or causes to be paid to Beneficiary all
of the Indebtedness, then the Trustee's interest in the
Real Property shall cease, and upon receipt by
Beneficiary of such payment, Beneficiary shall either
(a) assign the Loan Documents and endorse the Notes (in
either case without recourse or warranty of any kind)
to a takeout lender, upon payment of an administrative
fee of $750, or (b) release this Deed of Trust.
IN WITNESS WHEREOF, Grantor has executed and delivered this
Deed of Trust as of the date first set forth above.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3 GP,
Inc.,
a Texas corporation,
its General Partner
By
_____________________
David B. Warner
Vice President
STATE OF )
) SS.
COUNTY OF )
I HEREBY CERTIFY that on this ___ day of November,
1996, before me, ___________________________________, a Notary
Public in and for the State and County aforesaid, personally
appeared David B. Warner, who acknowledged himself to be the Vice
President of AIP Properties #3 GP, Inc., a corporation organized
under the laws of Delaware and the General Partner of AIP
Properties #3, L.P., a limited partnership organized under the
laws of Delaware, and that, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by
signing the name of the limited partnership by himself as such
Vice President of AIP Properties #3 GP, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
_________________________________
Notary Public
My Commission Expires:
(NOTARIAL SEAL)
EXHIBITS A-1 THROUGH A-7
EXHIBITS B-1 THROUGH B-7
AIP Industrial Portfolio
Meridian Warehouse
Tarrant County, Texas
AEGON Loan No. 87482
$1,162,500 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $1,162,500, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$9,829.75. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Beltline Business Park
Dallas County, Texas
AEGON Loan No. 87480
$2,775,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $2,775,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$23,464.56. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Plaza Southwest 1-5
Harris County, Texas
AEGON Loan No. 87485
$3,375,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $3,375,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$28,537.97. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Commerce Park North 1 & 2
Harris County, Texas
AEGON Loan No. 87484
$2,100,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $2,100,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$17,756.96. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Gateway 5 & 6
Dallas County, Texas
AEGON Loan No. 87481
$2,850,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $2,850,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$24,098.73. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
This Note is closed to prepayment during the first thirty
six (36) full calendar months of its term. Thereafter, the
principal balance of this Note may be prepaid, in whole or
in part, upon not less than thirty (30) days' prior written
notice to Lender. At the time of any prepayment, the
Borrower shall pay all accrued interest on the principal
balance of the Note and all other sums due to Lender under
the Loan Documents. In addition, unless the prepayment
occurs during the 90-day period preceding the Maturity Date,
the Borrower shall pay a prepayment premium equal to the
greater of (a) one percent of the prepayment amount and (b)
an amount that the parties agree will compensate Lender for
the loss of its bargained-for investment (the "Yield
Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Northgate II, Buildings 5-8
Dallas County, Texas
AEGON Loan No. 87483
$5,175,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $5,175,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$43,758.22. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
This Note is closed to prepayment during the first thirty
six (36) full calendar months of its term. Thereafter, the
principal balance of this Note may be prepaid, in whole or
in part, upon not less than thirty (30) days' prior written
notice to Lender. At the time of any prepayment, the
Borrower shall pay all accrued interest on the principal
balance of the Note and all other sums due to Lender under
the Loan Documents. In addition, unless the prepayment
occurs during the 90-day period preceding the Maturity Date,
the Borrower shall pay a prepayment premium equal to the
greater of (a) one percent of the prepayment amount and (b)
an amount that the parties agree will compensate Lender for
the loss of its bargained-for investment (the "Yield
Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
AIP Industrial Portfolio
Westchase Park 1 & 2
Harris County, Texas
AEGON Loan No. 87486
$1,327,500 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at 6210 North Beltline, Suite 90, Irving, Texas 75063-
2656 ("Borrower"), promises to pay $1,327,500, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-5223.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$11,224.94. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
Borrower shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at Lender's
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
Except for prepayments permitted pursuant to Section 18 of
the Loan Agreement, this Note is closed to prepayment during
the first thirty six (36) full calendar months of its term.
Thereafter, the principal balance of this Note may be
prepaid, in whole or in part, upon not less than thirty (30)
days' prior written notice to Lender. At the time of any
prepayment, the Borrower shall pay all accrued interest on
the principal balance of the Note and all other sums due to
Lender under the Loan Documents. In addition, unless the
prepayment occurs during the 90-day period preceding the
Maturity Date, the Borrower shall pay a prepayment premium
equal to the greater of (a) one percent of the prepayment
amount and (b) an amount that the parties agree will
compensate Lender for the loss of its bargained-for
investment (the "Yield Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, Lender shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition Lender's obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at 6210-6230 North Beltline Road, Irving, Dallas County,
Texas, as more particularly described therein, conveying
certain real property located at 6025 Commerce and 2900
Gateway, Irving, Dallas County, Texas, as more particularly
described therein, conveying certain real property located
at 2019-2025 Meridian Street, Arlington, Tarrant County,
Texas, as more particularly described therein, conveying
certain real property located at 10305-10395 Brockwood Road
and 10410-10450 Markison Road, Dallas, Dallas County, Texas,
as more particularly described therein, conveying certain
real property located at 15621 and 15631 Blue Ash Drive,
Houston, Harris County, Texas, as more particularly
described therein, conveying certain real property located
at 7302 and 7350 Harwin Drive, 5750 and 5601 Blintliff
Drive, and 5755 Bonhomme Drive, Houston, Harris County,
Texas, as more particularly described therein, and conveying
certain real property located at 3120 and 3130 Rogerdale
Road, Houston, Harris County, Texas, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at 100, 110-120 E.
Huntington Drive, Monrovia, Los Angeles County, California,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at 801-
809 Barkwood Court, Baltimore, Anne Arundel County,
Maryland, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at 6111 and 6155 Woodlake, San Antonio,
Bexar County, Texas, by a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of Lender. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and Lender
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
Lender's costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into Lender's choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following Lender's acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by Lender, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND LENDER WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND LENDER AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, Lender shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by Lender.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
David B. Warner
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, Anne Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
