UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 30, 1997
ASSET INVESTORS CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 1-9360 84-1038736
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
3600 South Yosemite Street, Suite 350 80237
Denver, Colorado (Zip Code)
(Address of principal executive offices)
(303) 793-2703
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address,
if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 30, 1997, Asset Investors Corporation (the "Registrant")
invested $10,000,000 in cash in four contiguous adult manufactured housing
communities with 760 home sites in the Phoenix, Arizona metropolitan area. The
investment consists of a $5,398,000 first mortgage loan bearing interest at 10%
per annum, due in April 2001 and a $4,602,000 second mortgage loan convertible
into a 50% ownership interest in the properties. The second mortgage loan
accrues interest at 15% per annum and pays interest at 9% per annum, increasing
1% each year to a maximum of 12% per annum. The Registrant will receive
additional interest of 3% of gross revenues, increasing to 13% of gross revenues
in the event of a refinancing of the properties, and 50% of net proceeds from a
sale or refinancing. The Registrant also has the right to purchase the
properties at fair market value in ten years, or earlier, based on certain
events. Due to the conversion features, participation in gross revenues of the
second mortgage loan and the right to acquire the properties, the mortgages will
be accounted for as an equity investment in real estate for the Registrant's
financial statements purposes. Due to the Registrant's intent to acquire
additional manufactured housing communities, the Registrant's future dividends
and the taxable portion thereof cannot be estimated at this time.
Certain statements made by the Company's officers included in, but not
limited to, this Form 8-K, periodic press releases, oral statements about the
Company, and conference calls following quarterly earnings releases, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The statements include projections of the
Registrant's cash flow and dividends. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Registrant to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include the following:
general economic and business conditions; interest rate changes; risks inherent
in owning real estate or debt secured by real estate; competition; the
availability of real estate assets at prices which meet the Registrant's
investment criteria; the Registrant's ability to maintain or reduce expense
levels and the Registrant's ability to complete its multi-step restructuring
plan of which the acquisition described above is a part.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) Financial Statements
Combined Statements of Excess of Revenues Over Specific
Operating Expenses of the Andrus Manufactured Home
Communities for the Year Ended December 31, 1996 (audited)
and the Period from January 1, 1997 to March 31, 1997
(unaudited)
(B) Pro-forma Financial Information
Pro-forma Condensed Consolidated Balance Sheet of Asset
Investors Corporation and Subsidiaries as of March 31, 1997
Pro-forma Condensed Consolidated Statement of Income of Asset
Investors Corporation and Subsidiaries for the Three Months
Ended March 31, 1997
Pro-forma Condensed Consolidated Statement of Income of Asset
Investors Corporation and Subsidiaries for the Year Ended
December 31, 1996
(C) Exhibits
Exhibit No. Description
2.2 Promissory Note dated as of July 30, 1997,
by and between the Registrant and Lost
Dutchman Parks, LLC
2.2(a) Combination Deed of Trust, Assignment of
Rents, Security Agreement and Fixture
Financing Statement dated as of July 30,
1997, by and between the Registrant and
Lost Dutchman Parks, LLC
2.2(b) Assumption Agreement and Note Modification
dated as of July 30, 1997, by and between
the Registrant and Lost Dutchman Parks,
LLC
2.2(c) Commitment Letter dated as of July 10, 1997,
by and between the Registrant and Lost
Dutchman Parks, LLC
23 Consent of Independent Auditors - Ernst &
Young LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASSET INVESTORS CORPORATION
Date: August 12, 1997
By: /s/ Kevin J. Nystrom
Kevin J. Nystrom
Chief Financial Officer
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Asset Investors Corporation
We have audited the accompanying combined statement of excess of revenues over
specific operating expenses of The Andrus Manufactured Home Communities (Note 1)
for the year ended December 31, 1996. This financial statement is the
responsibility of the management of The Andrus Manufactured Home Communities.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statement of excess of revenues
over specific operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
As described in Note 1, the financial statement of excess of revenues over
specific operating expenses excludes certain expenses that would not be
comparable to the operations of the properties after acquisition by Asset
Investors Corporation. The accompanying financial statement was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and is not intended to be a complete presentation of the
properties' revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the excess of revenues over specific operating expenses
(exclusive of expenses described in Note 1) of The Andrus Manufactured Home
Communities for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
July 3, 1997 ERNST & YOUNG LLP
- 1 -
<PAGE>
<TABLE>
<CAPTION>
The Andrus Manufactured Home Communities
Combined Statements of Excess of Revenues
Over Specific Operating Expenses
Period from January
Year ended 1, 1997 to
December 31, March 31, 1997
1996
-------------------------------------
(Unaudited)
Revenues
<S> <C> <C>
Rental $ 1,340,311 $ 483,574
Other 109,940 51,123
------------- -----------
1,450,251 534,697
Specific operating expenses
Property operations and maintenance 454,423 164,170
Real estate taxes 56,297 9,937
------------- -----------
510,720 174,107
Excess of revenues over specific operating expenses $ 939,531 $ 360,590
============= ===========
</TABLE>
See Accompanying Notes.
- 2 -
<PAGE>
The Andrus Manufactured Home Communities
Notes to Combined Statements of Excess of Revenues
Over Specific Operating Expenses
1. Organization and Significant Accounting Policies
Description of Properties
The Andrus Manufactured Home Communities includes four manufactured
home/recreational vehicle communities (the Communities) owned and operated by
Andrus Development Corp., Inc. (the Company) located in Apache Junction,
Arizona. The Communities, which are contiguous and under common management and
control, are summarized as follows:
Manufactured Home Recreational
Community Lots Vehicle Lots Total
- ----------------------------------------------- ------------------- ------------
Sun Valley 264 - 264
Lost Dutchman 122 107 229
Blue Star 28 108 136
Apache Acres 34 97 131
In July 1997, the Company contributed the Communities to Lost Dutchman LLC. Lost
Dutchman LLC then entered into an agreement with Asset Investors Operating
Partnership L.P. (AIOP) whereby AIOP would provide a loan to Lost Dutchman LLC,
with the proceeds to be used to retire existing debt and fund improvements to
the Communities. Additionally, AIOP assumed an existing first mortgage on the
Communities.
Basis of Accounting
The accompanying statements of revenues over specific operating expenses are
presented on the accrual basis. These statements have been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for real estate properties. Accordingly, the statements
exclude certain historical expenses not comparable to the operations of the
property after acquisition, such as professional fees, depreciation,
amortization and interest.
Revenue Recognition
Rental income attributable to manufactured home/recreational vehicle lots is
recorded when due from residents.
Use of Estimates
The preparation of the financial statements of excess of revenues over specific
operating expenses in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
- 3 -
<PAGE>
ITEM 7(B).
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(Amounts in thousands)
(Unaudited)
As Previously Pro-Forma Pro-Forma
Reported Adjustments Results
---------------------- ---------------------- ---------------------
Assets
<S> <C> <C> <C>
Cash and cash equivalents $ 68,477 $ (32,871) (c) $ 35,606
Investment in rental properties, net -- 26,570 (a) 26,570
Investment in rental property joint ventures -- 10,256 (a) 10,256
Investment in Commercial Assets 19,627 -- 19,627
Other assets, net 762 2,931 (b) 3,693
------------ ------------ ----------
Total Assets $ 88,866 $ 6,886 $ 95,752
============ ============ ==========
Liabilities
Accounts payable and accrued liabilities $ 1,070 $ 358 (c) $ 1,428
Mortgage notes payable -- 4,962 (c) 4,962
Management fees payable 2,349 -- 2,349
------------ ------------ ----------
Total Liabilities 3,419 5,320 8,739
------------ ------------ ----------
Minority interest in operating partnership -- 316 (c) 316
------------ ------------ ----------
Stockholders' Equity
Common Stock 248 4 (c) 252
Additional paid-in capital 228,759 1,246 (c) 230,005
Cumulative dividends (240,727) -- (240,727)
Cumulative net income 97,802 -- 97,802
------------ ------------ ----------
Dividends in excess of net income (142,925) -- (142,925)
Unrealized holding losses on debt securities (635) -- (635)
------------ ------------ ----------
Total Stockholders' Equity 85,447 1,250 86,697
------------ ------------ ----------
Total Liabilities and Stockholders' Equity $ 88,866 $ 6,886 $ 95,752
============ ============ ==========
</TABLE>
See Notes to Pro-Forma Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(In thousands, except per share data)
(Unaudited)
Pro-Forma Adjustments
---------------------------------------
Acquisition of
Interests in
Resecuritization Manufactured
As Previously of Non-agency MBS Housing Pro-Forma
Revenues Reported Bonds Communities Results
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Rental income $ -- $ -- $ 1,168 (g) $ 1,168
Equity in earnings of rental property joint ventures -- -- 221 (h) 221
Property management income -- -- 51 (i) 51
Non-agency MBS bonds 2,000 (2,000) (d) -- --
Equity in earnings of Commercial Assets 464 -- -- 464
Other income and expenses, net 52 830 (e) (404) (j) 478
---------- ------------ ---------- ----------
Total revenues 2,516 (1,170) 1,036 2,382
---------- ----------- ---------- ----------
Expenses
Property operations and maintenance -- -- 412 (g) 412
Real estate taxes -- -- 111 (g) 111
Property management expenses -- -- 58 (i) 58
Management fees 277 (248) (f) 159 (k) 188
General and administrative 336 (42) (d) -- 294
Depreciation and amortization -- -- 265 (l) 265
Interest expense 26 (26) (e) 102 (m) 102
---------- ----------- ---------- ----------
Total expenses 639 (316) 1,107 1,430
---------- ----------- ---------- ----------
Net income before gain on resecuritization of non-agency
MBS bonds 1,877 (854) (71) 952
Gain on resecuritization of non-agency MBS bonds 7,359 -- -- 7,359
Management fees on resecuritization of non-agency MBS bonds (2,072) 145 (f) -- (1,927)
---------- ----------- ---------- ----------
Net income $ 7,164 $ (709) $ (71) $ 6,384
========== =========== ========== ==========
Net income per share $ .29 $ .25
========== ==========
Weighted-average shares outstanding 24,841 25,204
</TABLE>
See Notes to Pro-Forma Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share data)
Pro-Forma Adjustments
---------------------------------------
Acquisition of
Interests in
Resecuritization Manufactured
As Previously of Non-agency MBS Housing Pro-Forma
Reported Bonds Communities Results
----------------------------------------------------------------------
Revenues (unaudited)
<S> <C> <C> <C> <C>
Rental income $ -- $ -- $ 4,419 (g) $ 4,419
Equity in earnings of rental property joint ventures -- -- 573 (h) 573
Property management income -- -- 198 (i) 198
Non-agency MBS bonds 11,513 (11,513) (d) -- --
Equity in earnings of Commercial Assets 1,875 -- -- 1,875
Other income and expenses, net 136 3,329 (e) (1,622) (j) 1,843
---------- ----------- ---------- ----------
Total revenues 13,524 (8,184) 3,568 8,908
---------- ----------- ---------- ----------
Expenses
Property operations and maintenance -- -- 1,545 (g) 1,545
Real estate taxes -- -- 438 (g) 438
Property management expenses -- -- 240 (i) 240
Management fees 1,793 (1,664) (f) 541 (k) 670
General and administrative 1,145 (82) (d) -- 1,063
Elimination of DERs 825 -- -- 825
Depreciation and amortization -- -- 1,059 (l) 1,059
Interest expense 88 (88) (e) 408 (m) 408
---------- ----------- ---------- ----------
Total expenses 3,851 (1,834) 4,231 6,248
---------- ----------- ---------- ----------
Net income before gain on resecuritization of non-agency
MBS bonds 9,673 (6,350) (663) 2,660
Gain on resecuritization of non-agency MBS bonds -- 7,359 -- 7,359
Management fees on resecuritization of non-agency MBS bonds -- (1,466) -- (1,466)
---------- ----------- ---------- ----------
Net income $ 9,673 $ (457) $ (663) $ 8,553
========== =========== ========== ==========
Net income per share $ .39 $ .34
========== ==========
Weighted-average shares outstanding 24,595 24,958
</TABLE>
See Notes to Pro-Forma Condensed Consolidated Financial Statements.
<PAGE>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
NOTES TO PRO-FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
The pro-forma condensed consolidated balance sheet of the Registrant as
of March 31, 1997, is presented as if the May 14, 1997 and July 30, 1997,
acquisitions had occurred on March 31, 1997. The pro-forma condensed
consolidated statements of income are presented as if the March 27, 1997
resecuritization of the non-agency MBS bonds and the May 14, 1997 and July 30,
1997, acquisition transactions had occurred: (i) on January 1, 1997, for the
statement of income for the three months ended March 31, 1997; and (ii) on
January 1, 1996, for the statement of income for the year ended December 31,
1996. In management's opinion, all adjustments necessary to reflect the
resecuritization of the Registrant's non-agency MBS bond portfolio and the
acquisition of interests in manufactured housing communities and management
contracts have been made. The unaudited pro-forma condensed consolidated
financial statements should be read in conjunction with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996, the Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1997, and the Current
Report on Form 8-K dated May 14, 1997.
The unaudited pro-forma condensed consolidated financial statements are
not necessarily indicative of what the actual financial position or results of
operations would have been assuming the transactions had been completed as of
the dates indicated, nor does it purport to represent the future financial
position or results of operations of the Registrant.
(a) Reflects the purchase of seven manufactured housing communities for
$25,875,000 plus closing costs of $695,000; $256,000 in advances and other
costs for the acquisition of the 50% joint venture interest in another
manufactured housing community; and $10,000,000 advanced under notes on
four additional manufactured housing communities.
(b) Reflects $2,508,000 paid for the acquisition of the related manufactured
housing community management contracts and the acquisition of manufactured
home inventory at a cost of $423,000.
(c) Reflects consideration for the manufactured housing communities and
manufactured housing community management contracts of: $22,871,000 of
cash, 363,372 shares of Common Stock at $3.44 per share, 91,760 Operating
Partnership Units at $3.44 each, the assumption of $4,962,000 of existing
debt, and the assumption of $358,000 of other liabilities on May 14, 1997;
and $10,000,000 cash on July 30, 1997.
(d) Eliminates income from and expenses directly attributable to the non-agency
MBS bonds as a result of the resecuritization.
(e) Reflects the assumption that a portion of the proceeds from the
resecuritization of the non-agency MBS bonds is used to repay outstanding
debt and the remaining proceeds are invested in short-term investments
earning 5% per annum.
(f) Eliminates base fees and administrative fees on the non-agency MBS bonds
and adjusts incentive fees based upon adjusted net income.
(g) Reflects adjustment for the rental income and property expenses of the
seven acquired communities.
<PAGE>
(h) Reflects the equity in the earnings from the joint venture interests in
manufactured housing communities.
(i) Reflects expenses of the manufactured housing community management business
and income earned from the four managed communities not owned by the
Registrant.
(j) Eliminates the short-term investment income at 5% per annum on the cash
used to acquire the interests in manufactured housing communities and
management operations.
(k) Reflects base fees on assets acquired and additional incentive fees on
improved earnings as a result of the acquisition of the manufactured
housing communities and management operations (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Base fees $ 102 $ 407
Incentive fees 82 234
------- --------
Total Adjustment $ 184 $ 641
======= ========
</TABLE>
(l) Reflects depreciation and amortization of acquired assets on the
straight-line basis over the estimated useful lives of the assets. The
estimated useful lives are 25 years for land improvements and buildings and
10 years for the cost of management contracts on communities not owned by
the Registrant.
(m) Reflects interest expense on the assumed debt at 8.25% per annum.
PROMISSORY NOTE
$4,601,566.14 Phoenix, Arizona
July 30, 1997
FOR VALUE RECEIVED, LOST DUTCHMAN PARKS, LLC an Arizona limited
liability company (hereinafter called the "Maker"), promises to pay to the order
of ASSET INVESTORS OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
(hereinafter sometimes called "Lender"), or its assigns, at its office at 1873
S. Bellair Street, 17th Floor, Denver, Colorado 80222, Attention: Terry
Considine, or at such other place as the holder or holders hereof may from time
to time designate in writing, the principal sum of FOUR MILLION SIX HUNDRED ONE
THOUSAND FIVE HUNDRED SIXTY-SIX AND 14/100 DOLLARS ($4,601,566.14), or so much
thereof as remains unpaid from time to time (hereinafter called "Principal
Balance"), together with interest on the Principal Balance at the rate
hereinafter specified, in coin or currency, which, at the time or times of
payment, is legal tender for payment of public and private debts in the United
States of America, all in accordance with the terms hereinafter set forth.
From and after the date hereof, and until this Note is fully paid,
interest on the Principal Balance shall be computed at the rate of fifteen
percent (15%) per annum. Interest, computed at said rate for the portion of the
month of July, 1997, remaining after the date (the "Disbursement Date") on which
funds are disbursed hereunder, shall be prepaid on the Disbursement Date.
Installments of interest shall thereafter be due and payable in one hundred
twenty (120) consecutive, monthly payments, commencing on September 1, 1997, and
continuing thereafter on the first day of each and every calendar month through
and including April 30, 2001. From the Disbursement Date until August 1, 1998,
payments on this Note shall be computed and made based upon a rate (the "Pay
Rate") of nine percent (9%) per annum applied to the Principal Balance for the
preceding calendar month. The difference between the interest which accrues and
the payment of interest made for each calendar month shall be added to the
Principal Balance at the end of each calendar month. The Pay Rate shall be
increased annually by one percent (1%) as of August 1, 1998, and on each August
1st thereafter until the Pay Rate is twelve percent (12%) per annum, where the
Pay Rate shall remain for the term of this Note. Maker understands and agrees
that payments which are made based upon the Pay Rate shall cause the Principal
Balance to increase each month, which, in turn shall result in the required
payment amount increasing each month. The entire Principal Balance, and all
unpaid, accrued interest thereon, shall be due and payable in full on April 30,
2001 (hereinafter called "Maturity Date"). Any payments made by Maker in
addition to the aforesaid regular, monthly payments of interest shall be applied
first to accrued and unpaid interest and the remainder thereof shall be applied
to the Principal Balance; provided, however, that, if the holder hereof has made
any advance of monies under the terms of any instrument securing this Note,
which the Maker has not repaid, the holder hereof may, at its option, first
apply any monies received from the Maker to repayment of any such advance, plus
<PAGE>
interest thereon at the rate of eighteen percent (18%) per annum (hereinafter
called "Default Rate"), from the date of such advance, in such order as said
holder may elect, and the balance, if any, shall be applied to any regularly
scheduled, required, monthly payment of interest then due, in the manner above
provided. All interest payable hereunder shall be computed on the basis of a 360
day year of twelve (12) thirty (30) day months, provided that partial month
interest shall be computed on the basis of actual number of days principal is
outstanding.
In the event that any required payment of principal and/or interest is
not made within ten (10) days of the due date thereof, a late payment charge of
five cents ($.05) for each dollar ($1.00) so overdue may be charged by the
holder hereof for the purpose of defraying a portion of the expense incident to
handling such overdue payment. In the event that any such overdue payment is not
made within one (1) month of the due date thereof, an additional late payment
charge of three cents ($.03) for each dollar ($1.00) so overdue may be charged
by the holder thereof for such purpose, and said holder may charge an additional
three cents ($.03) for each dollar ($1.00) so overdue for each additional month,
or fraction thereof, during which any such payment remains past due. The
foregoing late payment charges apply individually to each required payment of
principal and interest which is past due, and once imposed will not be adjusted
pro rata on a daily basis.
The Maker agrees to pay an effective rate of interest which is the
stated rate provided in this Note plus any additional rate of interest resulting
from any charges of interest or in the nature of interest paid or to be paid in
connection with the loan evidenced hereby, including without limitation, all
amounts paid by or on behalf of the Maker to Lender pursuant to the terms of
that certain commitment letter dated July 10, 1997, from Lender to Maker.
Notwithstanding any provision herein or in the Deed of Trust or any Other Loan
Document contained, the total liability of the Maker for payments in the nature
of interest hereunder or thereunder shall not exceed interest at the maximum
rate permitted by the laws of the State of Arizona, if any, and any amount paid
as interest in excess of said maximum rate shall not be deemed to be a payment
of interest and shall be refunded to the Maker, and the Maker does hereby agree
to accept such refund.
Time is of the essence hereof. Notwithstanding any provision herein
which may be construed to provide to the contrary, in the event of any default
in the payment of any payment of principal and/or interest, or any part thereof,
when due hereunder, in the event of any default in the payment of any other sum
of money required to be paid hereunder, under the Deed of Trust or under any
Other Loan Document, or in the event of any default in the performance of or
compliance with any other covenant or condition of this Note or any other
covenant or condition of the Deed of Trust or of any Other Loan Document, then,
in any such case, the entire Principal Balance, with all accrued interest, any
late payment charges and any applicable reinvestment charge, shall, at the
option of the holder hereof, become immediately due and payable, without notice,
at the place of payment aforesaid. Failure to exercise this option, however
often, shall not constitute a waiver of the right to exercise it thereafter;
provided, however, that such option may not be exercised as to any given default
2
<PAGE>
subsequent to the correction of that default. From and after the date of
occurrence of any such default, and from and after the Maturity Date, interest
shall accrue on the Principal Balance at the Default Rate and shall be due and
payable on the first day of each calendar month or on demand, at Lender's
option; provided, however, that if all defaults are corrected and the
indebtedness secured hereby is fully reinstated in accordance with Arizona law,
the interest payable thereon shall again be computed at the rate provided on
page 1 of this Note, unless and until another default shall occur. Except as
hereinafter expressly provided, no modification or amendment of the terms of
this Note shall be effective unless made in a writing signed by the parties
hereto.
Each Maker, co-maker, endorser, surety and guarantor hereby guaranties
payment of this Note, waives demand, presentment, notice of nonpayment, protest,
notice of protest, notice of dishonor and diligence in collection and agrees
that without any notice to any such parties, the holder hereof, alone or
together with any present or future owner or owners of any property covered by
the Deed of Trust or by any Other Loan Document (herein called "Trust
Property"), may from time to time extend, renew, or otherwise modify the date or
dates or amount or amounts of payment above recited, or the holder hereof may
from time to time waive any right it has hereunder, under the Deed of Trust or
under any Other Loan Document and may release any part or parts of the Trust
Property from such Deed of Trust or Other Loan Document, with or without
consideration, and that, in any such case, each maker, co-maker, endorser,
surety and guarantor shall continue liable to pay the unpaid balance of the
indebtedness evidenced hereby as so extended, renewed or modified, and
notwithstanding any such waiver or release; and further agrees to pay all costs
of collection, including court costs and a reasonable amount for attorneys' fees
(including but not limited to court costs and reasonable attorneys' fees on
appeal), in case any payment shall not be made when due, and all costs and
expenses, including court costs and reasonable attorneys' fees (including court
costs and reasonable attorneys' fees on appeal), incurred in protecting the
security for this Note or in preserving the Trust Property, or in exercising or
defending, or in obtaining the right to exercise, the rights and remedies of
Lender hereunder, under the Deed of Trust or under any Other Loan Document,
whether suit be brought or not, and in probate, bankruptcy, insolvency,
arrangement, reorganization, receivership and other debtor-relief proceedings,
whether or not the holder hereof prevails therein, together with interest
thereon at the Default Rate from and after the date of payment of any such
costs, expenses and/or fees by said holder.
This Note is secured by a Combination Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Financing Statement of even date herewith
(herein called "Deed of Trust") covering the Trust Property, which is located in
Maricopa County, Arizona, by Other instruments and agreements (the "Other Loan
Documents"), and by one (1) or more Guaranties, if any. The Deed of Trust
provides for "Additional Interest" (as defined therein) to be paid by Maker, in
addition to the principal, interest and other charges set forth in this Note.
Notwithstanding anything to the contrary in this Note, the Deed of
Trust, or any other Loan Document, the Principal Balance of this Note is not
prepayable in part, without the express written consent of Lender.
3
<PAGE>
This Note is made with reference to and shall be construed in
accordance with and governed by the laws of the State of Arizona.
IN WITNESS WHEREOF, the Maker has executed this Promissory Note as of
the date first above written.
LOST DUTCHMAN PARKS, LLC
an Arizona limited liability company
By: /s/Norman Andrus
Name: Norman Andrus
Title: Manager
469044\10169.0001\07-29-97
4
WHEN RECORDED, RETURN TO:
James B. Connor
Gallagher & Kennedy, P.A.
2600 North Central Avenue
Phoenix, Arizona 85004-3020
COMBINATION DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT
THIS INSTRUMENT made as of the 30th day of July, 1997, between LOST
DUTCHMAN PARKS, LLC, an Arizona limited liability company (hereinafter referred
to as "Trustor"), whose address is 4614 S. Kachina Drive, Tempe, Arizona 85282,
CHICAGO TITLE INSURANCE COMPANY, an Arizona corporation (hereinafter referred to
as "Trustee"), whose address is 2020 North Central Avenue, #300, Phoenix,
Arizona 85004, and ASSET INVESTORS OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership (hereinafter referred to as "Beneficiary"), whose address is
1873 S. Bellair Street, 17th Floor, Denver, Colorado 80222, Attention: Terry
Considine.
WHEREAS, Trustor is the owner of certain real property located in the
County of Maricopa, State of Arizona, legally described on Exhibit A attached
hereto and hereby made a part hereof (hereinafter referred to as "Premises"),
which Premises are subject to certain Permitted Encumbrances approved in writing
by Beneficiary (hereinafter referred to as "Permitted Encumbrances") and
attached hereto as Exhibit B; and
WHEREAS, there have been constructed upon, under and on the Premises
certain buildings, structures and other improvements (hereinafter referred to as
"Improvements"), which are owned by Trustor; and
WHEREAS, Trustor is justly indebted to Beneficiary in the principal
amount of TEN MILLION AND NO/100 Dollars ($10,000,000.00), as evidenced by: (I)
one (1) Promissory Note in the amount of $4,601,566.14, made by Trustor, payable
to the order of Beneficiary, and dated of even date herewith (hereinafter
referred to as "Note #1"); and (ii) one (1) Promissory Note in the original
amount of $5,500,000.00, originally made by Norman Andrus, and subsequently
assumed by Trustor, payable to the order of Eastrich Multiple Investor Fund,
L.P., and dated April 15, 1994 (hereinafter referred to as "Note #2"; Note #1
and Note #2 are collectively referred to as "Note");
WHEREAS, said principal amount, together with interest thereon at the
rate of fifteen percent (15.0%) per annum, is payable in accordance with the
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terms of said Note, with the entire unpaid principal balance and any unpaid,
accrued interest thereon maturing and being due and payable in full not later
than April __, 2001; and
WHEREAS, there are now, or may in the future be, located on, within or
about the Premises and Improvements certain items of furniture, fixtures,
equipment, furnishings, machinery and personal property, owned by Trustor, and
now or hereafter attached or affixed to or installed or located within, and used
or usable in connection with the maintenance and operation of, the Premises and
the Improvements, whether attached or detached, including but not limited to any
and all such furniture; appliances; carpeting; floor coverings; draperies;
furnishings; fences; partitions; dynamos; doors; windows; millwork; overhead
doors; screens; storm windows and doors; locks; hardware; shades; awnings;
motors; engines; boilers; tanks; water heaters; pumps; furnaces; heat registers;
radiators; thermostats; plumbing; sinks; water closets; basins; faucets;
elevators; conveyors; switchboards; cleaning, call, vacuum and sprinkler
systems; fire extinguishing apparatus and equipment; water tanks; lighting,
heating, ventilating, air conditioning and air cooling units and equipment;
incinerating, communicating and refrigerating equipment; water, gas and electric
supply fixtures, machinery, ducts, piping, wiring, conduits, outlets,
appurtenances and equipment; burglar alarm and security systems; electronic
intercommunication system; maintenance and cleaning equipment and supplies;
parking lot lighting; and trees, bushes and shrubs, whether or not permanently
affixed to the real estate, together with all appurtenances, extensions,
additions, improvements, betterments, renewals, accessions, replacements,
proceeds, products and substitutions thereto, therefor and thereof, but
expressly excluding all equipment, trade fixtures, inventory and personal
property owned by any tenant and used in operating the business being conducted
in the Improvements by a tenant, as opposed to being owned by Trustor and used
in the maintenance and operation of the Premises and Improvements themselves,
and all water, water rights, shares of stock evidencing water rights, claims to
water, and agreements relating to the supply of water, whether real or personal,
now or hereafter (i) appurtenant thereto, (ii) made or used in connection
therewith, or (iii) arising from the ownership thereof, and all the reversions,
remainders, rents, issues and profits thereof; (hereinafter collectively
referred to as "Property").
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged; in consideration of the loan evidenced by the Note; and to secure
the payment of principal, interest, late payment charges and reinvestment
charges evidenced or provided for by the Note, the payment by Trustor to
Beneficiary as herein provided of all sums advanced by Beneficiary pursuant to
any term hereof, with interest thereon, and the performance and observance of
all of the covenants and agreements herein contained and contained in the Other
Loan Documents (defined below), the Note, all of the terms of which are hereby
incorporated herein and made a part hereof by reference as if fully set forth
herein, and this Deed of Trust, TRUSTOR DOES HEREBY GRANT, BARGAIN, SELL,
CONVEY, WARRANT, ASSIGN, PLEDGE AND CONFIRM UNTO BENEFICIARY, ITS SUCCESSORS AND
ASSIGNS, FOREVER, WITH POWER OF SALE AND RIGHT ON ENTRY AND POSSESSION, all of
Trustor's right, title and interest in and to the Premises, including all
rights, easements, privileges and appurtenances thereunto belonging or in
anywise appertaining, the Improvements, the Property and all rents, issues,
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income and profits therefrom, including but not limited to Trustor's interest
in, to and under any leases thereof and all right to collect any and all rents
from tenants of the Premises and Improvements; and all other rights, interests
and property herein assigned by Trustor to Beneficiary or in which a security
interest is herein granted by Trustor to Beneficiary (all of which property
shall be hereinafter collectively referred to as the "Trust Property"). To have
and to hold the Trust Property, together with all privileges, hereditaments and
appurtenances thereunto now or hereafter belonging, or in anywise appertaining,
and the proceeds and products of all Improvements and Property, unto Trustee,
its successors and assigns, forever in trust for the benefit of Beneficiary, its
successors and assigns, forever; provided, nevertheless, that these presents are
upon the express condition that, if Trustor shall pay or cause to be paid in
full the Note, the provisions hereof, including, without limitation, those set
forth in Article VI, below, and if Trustor shall strictly observe and perform
all of the terms, covenants and conditions herein and therein set forth, and
upon the payment to Trustee of all fees, costs, charges, expenses and
liabilities incurred by Trustee, then this Combination Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Financing Statement (hereinafter
referred to as "Deed of Trust"), and the estate, right and interest of Trustee
and Beneficiary in and to the Trust Property created hereby, shall cease and be
and become void and of no force and effect and shall be satisfied and released
at Trustor's expense, otherwise to remain in full force and effect.
Trustor and Beneficiary further agree as follows:
ARTICLE I
GENERAL COVENANTS AND WARRANTIES
Section 1.1. Payment of Indebtedness. Trustor shall duly, punctually and fully
pay each and every installment of principal and interest on the Note and all
other indebtedness secured hereby, as and when the same shall become due, and
shall duly, punctually and fully do and perform all things on its part to be
done or performed under the Note, under this Deed of Trust and under any other
instrument or agreement (including without limitation the Commitment Letter
(defined below) and the Loan, Security and Lockbox Agreement) which refers to or
secures the Note (hereinafter referred to as the "Other Loan Documents"). Time
is of the essence hereof.
Section 1.2. Representations and Warranties. Trustor represents and warrants to
Beneficiary, as follows:
(a) Trustor is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Arizona, the
current members in which are Norman Andrus and The Norman Andrus
Irrevocable Trust, u/a/d 7/29/97 (hereinafter referred to, together
with their successors in interest, as the "Members").
(b) Fee Title. Trustor is the lawful owner of and has good and marketable
fee simple absolute title to the Trust Property; Trustor has good right
and lawful authority to grant, bargain, sell, convey, warrant,
mortgage, assign, pledge and confirm the same as provided herein; and
the Trust Property is free and clear of all deeds of trust, mortgages,
liens, pledges, security interests, charges and encumbrances, excepting
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only Permitted Encumbrances. Trustor warrants and will defend the title
to the Trust Property against all claims and demands whatsoever, except
those made under Permitted Encumbrances.
(c) Prohibitions. There is no provision in any indenture, contract or
agreement, to which Trustor is a party or by which it is bound, or any
law, statute, ordinance, governmental rule, regulation or restriction,
or any order of any court or administrative agency, to which Trustor is
subject or by which Trustor is bound, which prohibits the execution and
delivery by Trustor of this Deed of Trust, the Note or any Other Loan
Documents, or the performance or observance by Trustor of any of the
terms, covenants or conditions of this Deed of Trust, the Note or any
Other Loan Document.
(d) Authorization. Execution and delivery of this Deed of Trust, the Note
and all Other Loan Documents have been duly and validly authorized, and
the Note, this Deed of Trust and each Other Loan Document have been
duly and validly executed and delivered by and on behalf of Trustor and
are valid, binding and enforceable obligations of Trustor in accordance
with their terms.
(e) Litigation. There are no actions, suits or proceedings pending or, to
the knowledge of Trustor, threatened against Trustor or the Trust
Property in any court or before any federal, state, municipal or other
governmental agency, which, if decided adversely to any of them, would
have a materially adverse effect upon this Deed of Trust, upon the
Trust Property or upon the value thereof, including but not limited to
notices, demands for payment or compensation for injury or damage to
persons, the environment or natural resources, actions, suits,
proceedings, or damage settlements relating to Hazardous Substances (as
that term is hereinafter defined), and Trustor is not in default with
respect to any order of any court or governmental agency.
(f) Financial Statements. The financial statements of Trustor, Norman
Andrus, Andrus Development Corp., Inc., and the Trust Property,
heretofore furnished to Beneficiary, fairly present the financial
condition of Trustor, Norman Andrus, Andrus Development Corp., Inc., on
the dates thereof and the results of operations of Trustor and the
Trust Property for the period or periods indicated therein, all in
conformity with generally accepted accounting principles consistently
followed. There has been no material adverse change in the condition,
financial or otherwise, of Trustor, Norman Andrus, Andrus Development
Corp., Inc., or the Trust Property since the latest financial statement
so furnished.
(g) No Default. Trustor is not in default in the payment of the principal
of or interest on any indebtedness for borrowed money and is not in
default under any instrument or agreement under and subject to which
any indebtedness for borrowed money has been incurred or is secured,
and no event has occurred under the provisions of any such instrument
or agreement which, with or without the lapse of time or the giving of
notice, or both, constitutes or would constitute a default or an event
of default thereunder.
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(h) Use. The Premises are neither agricultural property, property in
agricultural use, nor the homestead of Trustor or any Member, but
rather are the site of one or more mobile home parks and appurtenances
thereto.
(i) Regulations. All applicable building, zoning, occupational safety and
health, energy and environmental laws, ordinances and regulations
affecting the Trust Property permit the use and occupancy thereof for
its intended purposes and have been complied with, and Trustor has
obtained the necessary consents, permits and licenses to operate the
Improvements for their intended purposes.
(j) (i) to the best of Trustor's knowledge after due inquiry, and except
(a) as disclosed in that Phase I Environmental Site Assessment,
prepaid by EnviroAssessments, Inc., as its Project No. 9407053,
and dated June 25, 1997, and (b) minute quantities used in the
ordinary course of cleaning and maintaining the Trust Property
and disposed of in accordance with all applicable Environmental
Regulations (as that term is hereinafter defined), no dangerous,
toxic or hazardous pollutants, contaminants, chemicals, wastes,
materials or substances, as defined in or governed by the
provisions of the Federal Resource Conservation and Recovery Act
of 1976, the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, and/or the Superfund
Amendments and Reauthorization Act of 1986 (42 U.S.C. 6901 et
seq. and 42 U.S.C. 9601 et seq.), as amended, or any other
federal, state or local hazardous substance, hazardous waste or
environmental laws, statutes, codes, ordinances, regulations,
directives, requirements or rules (hereinafter collectively
referred to as "Environmental Regulations"), and also including
urea-formaldehyde, polychlorinated biphenyls, dioxin, asbestos,
asbestos containing materials, nuclear fuel or waste, and
petroleum, including but not limited to crude oil or any fraction
thereof, natural gas, natural gas liquids, gasoline and synthetic
gas or any other waste, substance, pollutant or contaminant which
would subject the owner of the Premises to any damages, penalties
or liabilities under any applicable Environmental Regulation
(herein collectively referred to as "Hazardous Substances") have,
to the best of Trustor's knowledge, ever been placed, located,
produced, generated, created, stored, treated, transported,
incorporated, discharged, emitted, spilled, released, deposited,
disposed of or allowed to escape in, upon, under, over or from
the Trust Property;
(ii) no threat exists of a spill, discharge, release or emission of a
Hazardous Substance upon or from the Trust Property into the
environment;
(iii) to the best of Trustor's knowledge, the Premises have not ever
been used as or for a mine, a landfill, a dump or other disposal
facility, industrial or manufacturing purposes, or a gasoline
service station;
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(iv) no underground storage tank is now located in the Premises or
has, to the best of Trustor's knowledge, previously been located
therein but has been removed therefrom;
(v) no violation of any Environmental Regulation now exists or, to
the best of Trustor's knowledge, has ever existed in, upon,
under, over or from the Trust Property;
(vi) to the best of Trustor's knowledge, no notice of any violation or
alleged violation in, upon, under, over or from the Trust
Property of any Environmental Regulation has been issued or given
by any governmental entity or agency responsible for
administering or enforcing the same;
(vii) to the best of Trustor's knowledge, no person, party or private
or governmental agency or entity has given any notice of or
asserted any claim, cause of action, penalty, cost or demand for
payment or compensation, whether or not involving any injury or
threatened injury to human health, the environment or natural
resources, resulting or allegedly resulting from any activity or
event described in (i) above;
(viii)there are not now, nor to the best of Trustor's knowledge, have
there ever been, any actions, suits, proceedings or damage
settlements relating in any way to Hazardous Substances in, upon,
under, over or from the Trust Property;
(ix) to the best of Trustor's knowledge, there is no investigation or
report involving the Trust Property by any governmental entity or
agency which in any way relates to Hazardous Substances;
(x) the Trust Property is not listed in the United States
Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites or any other list, schedule, log, inventory
or record of Hazardous Substance sites maintained by any federal,
state or local governmental agency; and
(xi) the Trust Property is subject to no lien or claim for lien in
favor of any governmental entity or agency as a result of any
presence, release or threatened release of any Hazardous
Substance in, on, under, over or from the Trust Property.
(k) Accessibility Regulations. The Trust Property is in full compliance
with the provisions of the Americans with Disabilities Act of 1990 and
of all other applicable federal, state and local statutes, laws,
ordinances, codes, regulations, rules and requirements relating to the
accessibility thereof for disabled, handicapped and physically
challenged persons (hereinafter referred to as "Accessibility
Regulations").
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Section 1.3. Notice of Default. Trustor covenants and agrees with Beneficiary,
so long as any amount secured hereby shall remain unpaid, to give to Beneficiary
prompt notice in writing of any condition or event which constitutes an Event of
Default (as defined in Section 3.1 hereof), or which, after notice or lapse of
time, or both, would constitute such an Event of Default.
Section 1.4. Commitment Letter. The loan evidenced by the Note and secured
hereby has been made pursuant to a commitment letter from Beneficiary to
Trustor, dated June 4, 1997, as restated July 10, 1997, (hereinafter referred to
as "Commitment"). The terms of the Commitment have survived the closing of said
loan, and the terms of the Commitment are hereby incorporated herein by
reference and made a part hereof, to the extent not directly inconsistent
herewith, and to the same extent as if fully set forth herein. Any default by
Trustor under the terms of the Commitment shall be an Event of Default
hereunder.
Section 1.5. Further Actions. Trustor shall procure, do, execute, acknowledge
and deliver each and every further act, deed, conveyance, transfer, document and
assurance necessary or proper for the carrying out more effectively of the
purposes of this Deed of Trust and, without limiting the foregoing, for
granting, bargaining, selling, conveying, warranting, mortgaging, assigning,
pledging and confirming unto Beneficiary all of the Trust Property, or property
intended so to be, whether now owned or hereafter acquired by Trustor,
including, without limitation, the preparation, execution and filing of any
documents, such as financing statements and continuation statements, deemed
advisable by Beneficiary for perfecting and maintaining its lien on the Trust
Property.
This Deed of Trust shall further constitute and be deemed to be a Security
Agreement under the Arizona Uniform Commercial Code, now in force and as
hereafter amended, and Trustor hereby grants to Beneficiary a first and only,
present and continuing security interest in any Property, leases, rents, issues,
income, profits, instruments, general intangibles, accounts, contract rights and
claims included within or related to the Trust Property, and in all deposits
made pursuant to Section 1.7 hereof and all insurance policies and unearned
premiums prepaid thereon, insurance proceeds, and awards, payments or
consideration for the taking of the Trust Property, or any portion thereof, by
condemnation or exercise of the power of eminent domain, or from any sale in
lieu or in anticipation thereof, assigned by Trustor to Beneficiary hereunder,
to the extent that a security interest may be granted therein under the terms of
the Arizona Uniform Commercial Code.
Trustor agrees to supply Beneficiary with an inventory of all such property in a
form acceptable to Beneficiary, at any time, from time to time, upon receipt of
a written request therefor from Beneficiary.
Section 1.6. Use; Waste. Trustor shall not commit or permit waste upon the Trust
Property and shall cause the Trust Property and every part thereof, including
but not limited to parking areas, Improvements and all ingress and egress
easements, if any, to be continually maintained, preserved and kept in safe and
good repair, working order and condition, and will comply with all present and
future laws, statutes, ordinances, rules and regulations (including but limited
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to all Environmental Regulations and the Accessibility Regulations) of any
governmental authority having or claiming jurisdiction with reference to the
Trust Property and the manner of leasing, using, operating or maintaining the
same (hereinafter collectively referred to as "Governmental Requirements"), as
now existing or as hereafter amended, if applicable, and with all private
covenants and restrictions, if any, affecting the title to the Trust Property,
or any thereof (hereinafter collectively referred to as "Private Restrictions"),
and will not commit, suffer or permit any violation thereof, and will from time
to time make all necessary and proper restorations, rebuildings, repairs,
renewals, replacements, additions and betterments to the Trust Property, whether
required as the result of casualty or otherwise, and whether or not insurance or
condemnation proceeds are made available or are sufficient therefor, in a good
and workmanlike manner, so that the value and efficient use thereof shall be
fully preserved and maintained, and so that all Governmental Requirements and
Private Restrictions shall be complied with. Trustor shall forthwith give
Beneficiary written notice if it receives notice of any violation of any
Governmental Requirements or Private Restrictions, or if any material damage or
destruction occurs to the Trust Property.
Trustor agrees not to make any use of the Trust Property, other than as a mobile
home park and appurtenances thereto; not to demolish or remove the Improvements,
or make additions to or structural alterations of the Improvements, without the
prior written consent of Beneficiary; not to remove from the Premises or
Improvements any of the Property, unless immediately replaced with like property
of at least equal value; and not to add any new Improvements or Property, unless
all of such replacements and additions shall be free of any vendor's lien, title
reservation or other security interest prior hereto, excepting only Permitted
Encumbrances. All such replacements and additions shall be subject to the lien
hereof and the security interest created hereby, which shall be prior to all
other liens and security interests thereon and therein, excepting Permitted
Encumbrances.
Beneficiary or its agents may enter upon the Trust Property at all reasonable
times to inspect the same and for the purpose of protecting its security and
preserving its rights hereunder, but shall not be liable to any person, party or
entity for failure to do so.
Trustor covenants and agrees not to commence construction of any tenant finish
improvements, new buildings or Improvements upon the Premises or any additions
to existing Improvements, without the prior written consent of Beneficiary; to
promptly complete with due diligence any buildings, Improvements and additions
for which Beneficiary's consent is obtained hereunder, free and clear of all
liens, charges and encumbrances, except the lien hereof and Permitted
Encumbrances; and to keep and perform each and every term, condition and
covenant of any and all leases upon the Trust Property or any portion thereof
(hereinafter referred to as "Leases") to be by Trustor kept and performed, so as
to keep the Leases at all times in full force and effect, and agrees not to
anticipate or collect rents more than one (1) month in advance under any Lease
without, in each instance, the prior written consent of Beneficiary. Beneficiary
shall not be liable to either Trustor or the tenants for the performance of any
of the terms, covenants and conditions of the Leases. Trustor shall not by any
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act or omission diminish or impair the value of the Trust Property and likewise
shall not in any way weaken, diminish or impair the security hereof.
Trustor shall not seek, petition for, make, consent to or acquiesce in any
change in the Governmental Requirements and Private Restrictions relating to the
uses of the Trust Property, including but not limited to zoning and building
codes and ordinances, without Beneficiary's prior written consent. Except as may
be shown on the title policy issued to Beneficiary and insuring the first lien
position of this Deed of Trust, (a) Trustor shall not, by act or omission,
permit any property which is not subject to this Deed of Trust to rely on the
Trust Property or any part thereof or any interest therein to fulfill any
governmental requirement for the existence or use of the Trust Property, and (b)
the Trust Property shall not rely on any property which is not subject to this
Deed of Trust to fulfill any governmental requirement for the existence or use
of the Trust Property.
Section 1.7. Taxes and Assessments. Trustor shall, at least twenty (20) days
before any penalty or interest attaches thereto because of delinquency in
payment, pay and discharge, or cause to be paid and discharged, all taxes,
assessments, levies and governmental charges imposed upon or against the Trust
Property or upon or against the Note or the indebtedness secured hereby or upon
or against the interest of Beneficiary in the Trust Property or in the Note or
the indebtedness secured hereby (hereinafter referred to as "Impositions") and
will thereafter deliver the paid receipts therefor to Beneficiary within ten
(10) days after payment of any such Imposition. In the event of any legislative
enactment or judicial decision after the date of this Deed of Trust, imposing
upon Beneficiary the obligation to pay any such Imposition, or deducting the
lien of this Deed of Trust from the value of the Trust Property for the purpose
of taxation, or changing in any way the laws now in force for the taxation of
deeds of trust, mortgages or debts secured thereby, or the manner of the
operation of any such Imposition, so as to affect the interests of Beneficiary,
then, and in such event, Trustor shall bear and promptly pay the full amount of
such Imposition or any such tax; provided, however, that, if for any reason
payment thereof by Trustor would be unlawful or unenforceable, or if payment
thereof by Trustor would constitute usury or would render the loan or
indebtedness secured hereby wholly or partially usurious under any of the terms
or provisions of the Note or of this Deed of Trust, or otherwise, Beneficiary
may declare the whole sum secured by this Deed of Trust, with interest thereon,
to be immediately due and payable. Trustor shall not suffer to exist and shall
promptly pay and discharge any mechanic's, statutory or other lien or
encumbrance on the Trust Property or any part thereof (hereinafter referred to
as "Liens"), except for Permitted Encumbrances. Trustor shall perform all of its
obligations under the Permitted Encumbrances, and shall provide notice to
Beneficiary of any notices received in regard to any Permitted Encumbrances
(immediately upon receipt). To the extent any Permitted Encumbrances are deeds
of trust or other security instruments, Trustor agrees that a default thereunder
shall be deemed,w without notice or cure rights, to be an Event of Default
hereunder.
Notwithstanding the foregoing, Trustor shall not be in default hereunder in
respect to the payment of any Impositions or Liens which Trustor shall be
required by any provision hereof to pay, so long as Trustor shall first notify
Beneficiary, in writing, at least thirty (30) days prior to the due date
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thereof, if any, or otherwise at least ten (10) days before commencement of any
contest thereof, of its intention to contest the amount, applicability and/or
validity of such Imposition or Lien and shall thereafter, in good faith, in
compliance with all applicable statutes, and with all possible promptness,
diligently contest the same, and Trustor may postpone or defer payment of all or
a portion of said Impositions or Liens, if, but only if, permitted by statute,
and if neither the Trust Property, nor any portion thereof, would, by reason of
such postponement or deferment, be in danger of being forfeited or lost;
provided, however, that Trustor shall furnish to Beneficiary, prior to
commencing any such contest, cash or other security satisfactory to Beneficiary
to indemnify Beneficiary against any loss or liability by reason of any such
contest and to pay any such Imposition or Lien, together with interest and
penalties thereon, if any, if such contest should fail. Upon a final
adjudication of any such contest, and, in any event, at least thirty (30) days
prior to the date on which the interest of Beneficiary in the Trust Property
would otherwise forfeit by reason of the nonpayment of any such Impositions or
Liens, Trustor shall pay the amount thereof then due, including any penalties
and interest thereon. Beneficiary may, at its option, make such payment from the
security deposited by Trustor, if Trustor fails to so pay the same.
In order to further secure the payment of the sums and the performance of the
obligations secured hereby, Trustor shall pay to Beneficiary, monthly, in
addition to, concurrently with, and at the same time as each monthly payment of
principal and/or interest required hereunder, or under the Note, a sum
equivalent to one-twelfth (1/12) (or such greater fraction as may be necessary
to accumulate sufficient funds to make any payment due less than thirteen (13)
months after the date thereof) of the amount estimated by Beneficiary to be
sufficient to enable Beneficiary to pay, at least thirty (30) days before they
become due, all Impositions. No interest shall be payable by Beneficiary upon
the amounts so paid, and Beneficiary shall not be required to maintain the same
in a separate account, but may commingle the same with its general funds. Upon
demand by Beneficiary, Trustor shall deliver and pay over to Beneficiary such
additional sums as are necessary to make up any deficiency in the amount
necessary to enable Beneficiary to fully pay any of the items hereinabove
mentioned. Beneficiary shall not be required to pay any such items in an amount
in excess of the sums deposited or paid over by Trustor to Beneficiary pursuant
to this paragraph. Any excess sums so paid shall be retained by Beneficiary and
shall be applied to pay said items, as and when they become due in the future,
unless all amounts secured hereby have been paid in full, in which case all
excess sums so paid shall be refunded to Trustor. At Trustor's written request,
and if no Event of Default exists hereunder, Beneficiary shall use, or, at
Beneficiary's option, permit Trustor to use, all sums paid by Trustor pursuant
to this paragraph to pay the items hereinabove mentioned prior to delinquency.
In the event of the occurrence of any Event of Default hereunder, Beneficiary
may apply against the indebtedness secured hereby, in such a manner as
Beneficiary may determine, any funds of Trustor then held under this paragraph,
in which funds Trustor hereby grants to Beneficiary a security interest.
Section 1.8. Insurance. Trustor shall obtain, maintain and keep in full force
and effect during the term of this Deed of Trust, with all premiums paid
thereon, the following insurance:
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A. Insurance upon all Improvements and Property against loss or damage by
fire, lightning and other risks customarily covered by standard "all
risk" (or special form cause of loss) and extended coverage
endorsements, together with theft, vandalism, malicious mischief,
collapse, replacement cost, agreed amount, and restoration in
conformance with applicable laws and ordinances, endorsements, all in
such amounts as may be from time to time required by Beneficiary, but
in no event less than the full replacement cost of the Improvements now
existing or hereafter erected or placed upon the Premises, including
the cost of debris removal, and of all Property;
B. Broad form boiler and machinery insurance on all equipment and objects
necessary to operate the Trust Property, including but not limited to
heating, ventilating and air-conditioning equipment, elevators,
conveyors, and water heaters, providing for full repair and replacement
cost coverage, if applicable;
C. Comprehensive general public liability insurance against claims for
bodily injury. personal injury, death and/or property damage occurring
in, on or about the Trust Property, with coverage limits satisfactory
to Beneficiary (which shall initially be at least equal to
$1,000,000.00 with respect to any one (1) person, accident or
occurrence), and including contractual liability coverage for the tort
liability assumed by Trustor hereunder and under any Other Loan
Document;
D. Rent and rental value insurance, insuring against the loss of all rents
from the Trust Property for a period of at least twelve (12) months
after the casualty;
E. Flood insurance upon the Trust Property in such form and amount as may
from time to time be required by Beneficiary, if the Trust Property is
located in a designated flood plain area; and
F. Insurance upon the Trust Property against such other casualties and
contingencies as Beneficiary may from time to time reasonably require,
including but not limited to sprinkler insurance in amounts acceptable
to Beneficiary, all in such manner and form as may be satisfactory to
Beneficiary.
Trustor shall, at its sole cost and expense, from time to time and at any time
when Beneficiary shall so request, provide Beneficiary with evidence of the full
replacement cost of the Trust Property in a form acceptable to Beneficiary.
Trustor shall promptly notify Beneficiary and the appropriate insurer in writing
of any loss covered by any of the above-mentioned types of insurance.
All insurance provided for in this Section 1.8 shall be effected under a valid,
enforceable and manually signed policy or policies of insurance in form and
substance approved by Beneficiary, shall be issued by insurers of recognized
responsibility, which are licensed to do business in the State of Arizona, which
have a minimum rating of A and a financial class size of IX or larger, according
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to Best's Key Rating Guide for Property-Liability, and which are acceptable to
Beneficiary, and shall be satisfactory to Beneficiary in all other respects.
All policies maintained by Trustor pursuant to the foregoing Subsections A, B,
D, E and F shall (a) include a first mortgagee clause in favor of Beneficiary,
(b) provide that any losses payable thereunder shall be payable to Beneficiary
and assigns (pursuant to a loss payee clause in favor of, and acceptable to,
Beneficiary, to be attached to each such policy), (c) include effective waivers
by the insurer of all claims for insurance premiums against Beneficiary, (d)
provide that any losses shall be payable notwithstanding (i) any act of
negligence by Trustor or Beneficiary, (ii) any foreclosure or other proceedings
or notice of sale relating to the Trust Property, (iii) the vacancy of the
Improvements, (iv) any waiver of subrogation rights by the insured, and/or (v)
any change in the title to or ownership of any of the Trust Property, and (e) be
written in amounts sufficient to prevent Trustor from becoming a co-insurer
under said policies. The liability insurance policies described in the foregoing
Subsection C shall name Beneficiary as an additional named insured, shall
contain a separation or severability of interests clause and shall waive
contribution from any other insurance carried by Beneficiary in the event of
loss. Trustor shall cause the originals of the policies of all such insurance to
be deposited with Beneficiary. At least fifteen (15) days prior to the date on
which the premiums on each such policy shall become due and payable, Trustor
shall furnish Beneficiary with proof reasonably satisfactory to Beneficiary of
payment thereof. Each of such policies shall contain an agreement by the insurer
that the same shall not be amended, modified, canceled, reduced or terminated
for any reason, including but not limited to a failure to pay premiums and/or
expiration by its terms, without at least thirty (30) days' prior written notice
to Beneficiary. If this Deed of Trust is foreclosed, the purchaser at the
foreclosure sale shall, after the expiration of any statutory period of
redemption, become the sole and absolute owner of any and all such policies,
with the sole right to collect and retain all unearned premiums thereon, and,
for this purpose, Trustor hereby assigns and grants a security interest in said
policies and unearned premiums to Beneficiary.
If, under the terms and provisions of any Lease, the tenant thereunder is
required to maintain insurance of the types and for the amounts as set forth
above, and, if, pursuant to the terms of the Lease, such insurance is to be
maintained for the benefit of both the lessor and any beneficiary of the lessor,
Beneficiary will accept such policy or policies in lieu of the policies required
by this Section; provided the same meet all of the requirements set forth above.
In the event the tenant fails to maintain and keep such insurance in full force
and effect, Trustor shall then obtain such policy or policies as are required by
this Section.
In the event of loss, Trustor shall immediately give written notice thereof, and
of any claims filed under insurance policies as a result thereof, to
Beneficiary, and (i) if an Event of Default then exists hereunder, or (ii) if
Trustor does not promptly and in good faith make proof of loss and settle,
adjust or compromise any claims for loss, damage or destruction under any
policies of insurance maintained pursuant to Subsections A, B, D, E and F
hereof, and collect the proceeds thereof, Beneficiary is authorized and
empowered (but not obligated or required) to make proof of loss; settle, adjust
or compromise said claims; and collect and receive all such proceeds. The amount
of any such settlement, adjustment or compromise of claims shall always be
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subject to Beneficiary's approval. Trustor agrees to pay all costs and expenses
incurred by Beneficiary in connection therewith, including court costs and
attorneys' fees (prior to trial, at trial and on appeal), on demand, which costs
and expenses shall also be secured hereby and shall bear interest from the date
paid at the Default Rate specified in the Note (hereinafter referred to as
"Default Rate"), but Beneficiary shall not be liable to Trustor for any failure
by Beneficiary to collect or to exercise diligence in collecting any such
proceeds.
All proceeds of such insurance are hereby assigned, and shall be paid, to
Beneficiary. Such proceeds shall, at Beneficiary's option, be applied first to
the payment of all costs and expenses incurred by Beneficiary in obtaining such
proceeds, and second, at Beneficiary's option, either to the reduction of the
indebtedness hereby secured in such order as Beneficiary may elect, whether then
due and payable or not, without reinvestment charge, or to the restoration or
repair of the Trust Property, without affecting the lien of this Deed of Trust
or the obligations of Trustor hereunder Interest upon the entire indebtedness
secured hereby shall continue until any such proceeds are received and applied
to such indebtedness by Beneficiary. Pending a decision as to the proper use and
application of any insurance proceeds, and during any such restoration or
repair, Beneficiary shall not be liable for interest on such proceeds. If
Beneficiary elects to apply any such insurance proceeds to the restoration or
repair of the Trust Property, it shall not be liable for supervising such
restoration or repair or for supervising the disbursement of such insurance
proceeds therefor, but such disbursement shall proceed in a manner acceptable to
Beneficiary, which shall be similar to the manner in which major national banks
permit construction loan advances, and which shall be designed to include
reasonable controls to assure that such restoration or repair will be promptly
completed in a good and workmanlike manner and paid for in full, free of
mechanics' liens.
Notwithstanding the foregoing, Beneficiary shall be required to permit such
proceeds to be used for the restoration or repair of the Trust Property, if, but
only if, (a) the portion remaining can with restoration or repair continue to be
operated for the purposes utilized immediately prior to the damage or
destruction; (b) no Event of Default exists hereunder or under the Note or any
Other Loan Document; (c) the appraised value of the Trust Property after such
restoration or repair shall not have been reduced from its value immediately
prior to such damage, as confirmed in writing by an M.A.I. appraiser acceptable
to Beneficiary; (d) the tenants certify to Beneficiary their intention to remain
in possession of the Trust Property without any abatement or adjustment of
rental payments (other than temporary abatements during the period of
restoration and repair); (e) no liens will be placed on the Trust Property; and
(f) all other provisions of this Section 1.8 shall apply with respect to such
restoration or repair.
In the event proceeds are to be applied to the restoration of the Trust
Property, Trustor shall deposit with Beneficiary, prior to commencing any such
restoration or repair, the amount, if any, by which the cost of such restoration
or repair exceeds the amount of such insurance proceeds, which amount shall be
disbursed to pay costs of such restoration or repair prior to, and in the same
manner as, such insurance proceeds. Any surplus which may remain after payment
of all costs of restoration or repair may, at the option of Beneficiary, be
applied to reduction of the indebtedness hereby secured, in any order which
Beneficiary may determine, whether then matured or to mature in the future,
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without reinvestment charge, or be paid to Trustor, as its interest may appear,
the choice of application to be solely at the discretion of Beneficiary. Trustor
agrees to promptly complete any such restoration and repair in a good and
workmanlike manner, in accordance with all Governmental Requirements,
Accessibility Regulations and Private Restrictions.
In no event shall Beneficiary be held responsible for failure to pay for any
insurance required hereby, or for any loss or damage growing out of a defect in
any policy thereof or growing out of any failure of any insurance company to pay
for any loss or damage insured against or for failure by Beneficiary to obtain
such insurance or to collect the proceeds thereof.
In order to further secure the payment of the sums and the performance of the
obligations secured hereby, Trustor shall pay to Beneficiary, monthly, in
addition to, concurrently with, and at the same time as each monthly payment of
principal and/or interest required hereunder, or under the Note, a sum
equivalent to one-twelfth (1/12) (or such greater fraction as may be necessary
to accumulate sufficient funds to make any payment due less than thirteen (13)
months after the date thereof) of the amount estimated by Beneficiary to be
sufficient to enable Beneficiary to pay, at least thirty (30) days before they
become due, all premiums for insurance acquired herein. No interest shall be
payable by Beneficiary upon the amounts so paid, and Beneficiary shall not be
required to maintain the same in a separate account, but may commingle the same
with its general funds. Upon demand by Beneficiary, Trustor shall deliver and
pay over to Beneficiary such additional sums as are necessary to make up any
deficiency in the amount necessary to enable Beneficiary to fully pay any of the
items hereinabove mentioned. Beneficiary shall not be required to pay any such
items in an amount in excess of the sums deposited or paid over by Trustor to
Beneficiary pursuant to this paragraph. Any excess sums so paid shall be
retained by Beneficiary and shall be applied to pay said items, as and when they
become due in the future, unless all amounts secured hereby have been paid in
full, in which case all excess sums so paid shall be refunded to Trustor. At
Trustor's written request, and if no Event of Default exists hereunder,
Beneficiary shall use, or, at Beneficiary's option, permit Trustor to use, all
sums paid by Trustor pursuant to this paragraph to pay the items hereinabove
mentioned prior to delinquency. In the event of the occurrence of any Event of
Default hereunder, Beneficiary may apply against the indebtedness secured
hereby, in such a manner as Beneficiary may determine, any funds of Trustor then
held under this paragraph, in which funds Trustor hereby grants to Beneficiary a
security interest.
Section 1.9. Utilities. Trustor shall pay or cause to be paid promptly, when
due, all charges or fees for utilities or services, including but not limited to
electricity, water, gas, telephone, sanitary sewer, and trash and garbage
removal, supplied to the Trust Property, and, upon request of Beneficiary, shall
furnish receipts to Beneficiary showing such payment.
Section 1.10. Financial Statements. Trustor covenants and agrees with
Beneficiary, as long as any amount secured hereby remains unpaid, at Trustor's
sole cost and expense, to (a) at all times keep proper and accurate books of
account in which full, true and correct entries will be made of all transactions
affecting the Trust Property in accordance with generally accepted accounting
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principles applied on a consistent basis throughout the periods involved; (b) at
all reasonable times permit Beneficiary and its representatives to inspect such
books and records and to make copies thereof; (c) no later than fifteen (15)
days after the end of each calendar month after the date hereof, certify as
correct and furnish Beneficiary with such information and statements as it may
reasonably request concerning the financial, business and operational status of
Trustor and/or the Trust Property and concerning performance by Trustor of the
covenants and agreements contained in the Note and in this Deed of Trust; (d)
upon the existence of any uncured Event of Default hereunder, such reports
required under (c), above shall be compiled by an independent certified public
accountant selected by Trustor and acceptable to Beneficiary; and (e) annually
furnish to Beneficiary, as soon as available, but in any event within one
hundred twenty (120) days after the close of each fiscal year of Trustor, at
Trustor's sole cost and expense, Trustor's annual financial statements and an
operating statement for the Trust Property for said fiscal year, all prepared in
accordance with generally accepted accounting principles consistently applied,
and certified as true, correct and complete by Trustor, which operating
statements shall include at least a statement of gross income (itemized as to
source), all operating expenses (itemized), depreciation charges and net income,
and shall reflect the operation of the Trust Property during said fiscal year,
all in reasonable detail and setting forth comparable figures for the preceding
fiscal year, as well as a tenants' list and current rent schedule. If Trustor
fails to supply to Beneficiary any financial and/or operating statements which
Trustor is hereby required to so supply, or at any time Trustor is otherwise in
default hereunder, Beneficiary or its authorized representatives may have access
to all of Trustor's books and records for the purpose of auditing the same
and/or itself obtaining such statements, at Trustor's expense.
Beneficiary, by giving written notice to Trustor at any time within sixty (60)
days after receiving the above-mentioned financial and operating statements from
Trustor, may elect to have a person or firm of its choice make a confirmatory
examination of Trustor's books and records pertaining to the Trust Property. Any
such confirmatory examination shall be at Beneficiary's sole cost and expense,
unless said examination reveals significant errors or discrepancies in the
above-mentioned financial and operating statements, in which event the
confirmatory examination shall be at the sole cost and expense of Trustor.
Section 1.11. Beneficiary's Right to Perform. If Trustor shall fail to observe,
comply with, or perform any of the terms, covenants and conditions herein with
respect to the procuring and delivery of insurance, the payment of Impositions
or Liens, the keeping of the Trust Property in repair, the furnishing of
financial and operating statements, the removal and/or disposal of Hazardous
Substances, or any other term, covenant or condition herein or in the Note or
any Other Loan Document contained, Beneficiary may itself observe, comply with
or perform the same, may make such advances to observe, comply with and perform
the same as Beneficiary shall deem appropriate, and may enter the Trust Property
for the purpose of observing, complying with and performing any such term,
covenant or condition. Beneficiary may expend such sums, including reasonable
attorneys' fees (prior to trial, at trial and on appeal), to sustain the lien of
this Deed of Trust or its priority, or to protect or enforce its rights
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hereunder, or to obtain the right to enforce its rights and remedies hereunder,
including the payment of any Liens, claims and encumbrances, other than
Permitted Encumbrances which are not in default, as it may deem desirable.
Trustor agrees to repay all sums so advanced or expended upon demand, with
interest thereon at the Default Rate from the date of advancement or
expenditure, and all sums so advanced or expended, with interest, shall be
secured hereby, but no such advance or expenditure shall be deemed to relieve
Trustor from any default hereunder. Beneficiary shall not be bound to inquire
into the validity of any Imposition or Lien which Trustor fails to pay as and
when required hereby and which Trustor has not given notice to Beneficiary of
its intention to contest in accordance with the terms hereof.
Section I.12. Due on Transfer. In the event Trustor transfers, leases (except as
permitted under the terms of an Assignment of Leases and Rents from Trustor to
Beneficiary dated as of the date of this Deed of Trust) or conveys to any other
party any interest in the Trust Property or any portion thereof, legal or
equitable, voluntarily or by operation of law, without the prior written consent
of Beneficiary; in the event Trustor shall sell or otherwise dispose of the
Trust Property, or any interest therein or portion thereof, without the prior
written consent of Beneficiary; in the event Trustor shall further encumber the
Trust Property, or any portion thereof, without the prior written consent of
Beneficiary; or in the event any change occurs in the Members of Trustor
(hereinafter referred to as "Members"), without the prior written consent of
Beneficiary may, at its election, declare the entire indebtedness hereby secured
to be immediately due and payable, without notice to Trustor (which notice
Trustor hereby expressly waives), and upon such declaration the entire
indebtedness hereby secured shall be immediately due and payable, anything
hereinabove or in the Note to the contrary notwithstanding. As used herein,
"transfer" shall include transfers by sale, gift, bequest, or otherwise. If
Trustor shall fail to pay such sums, Beneficiary may, without further notice or
demand on Trustor, invoke any remedies permitted under the terms hereof,
including, without limitation, Article III. As used herein, "transfer" shall
include transfers by sale, gift, bequest, or otherwise.
In the event Trustor shall request the consent of Beneficiary to a conveyance or
encumbrance, Trustor shall deliver a written request to Beneficiary together
with complete information regarding such conveyance or encumbrance and shall
allow Beneficiary thirty (30) days after delivery of all required information
for evaluation of such request. In the event that such request is not approved
within such thirty (30) day period, it shall be deemed not approved. Beneficiary
may charge an administrative fee to process any such sale, conveyance, transfer,
deed of trust or other encumbrance. Such approval may be subject to such
modifications of the loan terms, interest rate, and maturity date as may be
established by Beneficiary. Consent as to any one transaction shall not be
deemed to be a waiver of the right to require consent to future or successive
transactions. If the Trust Property should be transferred to a privately held
corporation, limited liability company or a partnership pursuant to the terms of
this Section 1.12 during the term of this Deed of Trust, thereafter a subsequent
transfer of a stock, member, or partnership interest shall constitute a
conveyance for purposes of this Section 1.12 and the consent of Beneficiary
shall be required.
Notwithstanding any provision to the contrary herein, Beneficiary shall consent,
without transfer fee, to transfers by Members of their ownership interest in
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Trustor to (i) the estates or legal representatives of a member and (ii) a
trust, custodianship or other fiduciary arrangement in respect of which the
member is the trustee, custodian or other fiduciary with voting power over such
trust, custodianship or other fiduciary arrangement; provided that in each case
(a) there exists no default or Event of Default; (b) Norman Andrus remains as
Manager of Trustor; (c) written notice of any such transfer and copies of all
proposed transfer documents are delivered to Beneficiary at least thirty (30)
days prior to any such transfer; (d) Trustor pays Beneficiary's out of pocket
expenses in connection with such transfer; and (e) copies of the executed
transfer documents and the related amendments to Trustor's operating agreement
are promptly delivered to Beneficiary upon completion of the transfer.
No transfer, conveyance, lease, sale, change or other disposition shall relieve
(a) Trustor from personal liability for its obligations hereunder or under the
Note, or (b) any Guarantor from his or her liability, whether or not the
transferee assumes this Deed of Trust. Beneficiary may, without notice to
Trustor, deal with any successor owner of all or any portion of the Trust
Property in the same manner as with Trustor, without in any way discharging the
liability of Trustor hereunder or under the Note.
Trustor shall not mortgage, pledge or otherwise grant a security interest in any
of the Trust Property as collateral security for any other loan or forbearance,
without the prior written consent of Beneficiary.
Section 1.13. Assignment of Rents.
(a) As additional security for the indebtedness secured by this Deed of
Trust, Trustor does hereby bargain, sell, assign, transfer and set over
unto Beneficiary all the rents, issues, profits and other income of any
kind which, whether before or after foreclosure, or during the full
statutory period of redemption, if any shall accrue and be owing for
the use or occupation of the Trust Property or any part thereof.
(b) Trustor agrees that upon or at any time after (i) the occurrence of an
Event of Default hereunder, or under the Note, or under any separate
Assignment of Leases and Rents securing the Note, or (ii) the
recordation of notice of trustee's sale or sale for the foreclosure of
this Deed of Trust, or (iii) the commencement of an action to foreclose
this Deed of Trust, or (iv) the commencement of any period of
redemption after judicial foreclosure of this Deed of Trust,
Beneficiary shall, in any such event, and at any such time, upon
application to the Superior Court in the county where the Trust
Property or any part thereof is located, by an action separate from the
foreclosure or trustee's sale, in the foreclosure action, or by
independent action (it being understood and agreed that the existence
of a foreclosure action or pending trustee's sale is not a prerequisite
to any action for a receiver hereunder), be entitled to the appointment
of a receiver for the rents, issues, profits and all other income of
every kind which shall accrue and be owing for the use or occupation of
the Trust Property or any part thereof, whether before or after
foreclosure or trustee's sale, or during the full statutory period of
redemption, if any, upon a showing that Trustor has breached any
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covenant contained in this Deed of Trust, the Note or any such separate
Assignment of Leases and Rents, including, without limitation, any
covenant relating to any of the following:
(1) Repayment of tenant security deposits, with interest thereon,
as required by applicable state laws, if any;
(2) Payment when due of prior or current real estate taxes or
special assessments with respect to the Trust Property, or the
periodic escrow for payment of the same;
(3) Payment when due of premiums for insurance of the types
required hereby, or the periodic escrow for payment of the
same; or
(4) Keeping of the covenants required of a lessor or licensor
pursuant to applicable state laws, if any.
Beneficiary shall be entitled to the appointment of a receiver without regard to
waste, adequacy of the security or solvency of Trustor. The court shall
determine the amount of the bond to be posted by the receiver. The receiver, who
shall be an experienced property manager, shall collect (until the indebtedness
secured hereby is paid in full and, in the case of a foreclosure sale, during
the entire redemption period, if any) the rents, issues, profits and all other
income of any kind from the Trust Property, manage and operate the Trust
Property, execute leases within or beyond the period of the receivership, if
approved by the court, make tenant finish improvements required by Leases and
apply all rents, issues, profits and other income collected by such receiver in
the following order:
(A) to payment of all reasonable fees of the receiver, if any,
approved by the court;
(B) to the items listed in clauses (1) through (4) above (to the
extent applicable) in the priority as numbered;
(C) to expenses for normal maintenance, operation and management
of the Trust Property and for construction of tenant finish
improvements required by Leases executed by the receiver;
(D) the balance to Beneficiary to be credited, prior to
commencement of foreclosure or a trustee's sale, against the
indebtedness secured hereby, in such order as Beneficiary may
elect, or to be credited, after commencement of foreclosure or
notice of a trustee's sale, to the amount required to be paid
to effect a reinstatement prior to foreclosure or trustee's
sale, or to be credited, after a foreclosure or trustee's
sale, to any deficiency and then to the amount required to be
paid to effect a redemption, pursuant to applicable state
laws, or their successors, as the case may be, with any excess
to be paid to Trustor; provided, however, that if this Deed of
Trust is not reinstated nor the Trust Property redeemed, as
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and during the times provided by said state laws, or their
successors, the entire amount received pursuant hereto, after
deducting therefrom the amounts applied by Beneficiary to any
deficiency, shall be the property of the purchaser of the
Trust Property at the foreclosure or trustee's sale, together
with all or any part of the Trust Property acquired through
foreclosure.
The receiver shall file periodic accountings as the court determines are
necessary and a final accounting at the time of his discharge. Beneficiary shall
have the right, at any time and without limitation, to advance money to the
receiver to pay any part or all of the expenses which the receiver should
otherwise pay as above provided, if cash were available from the Trust Property,
and all sums so advanced, with interest thereon at the Default Rate from the
date advanced, shall be a part of the sum required to be paid to redeem from any
foreclosure sale or reinstate prior to a foreclosure or trustee's sale. Said
sums shall be proved by the affidavit of Beneficiary, its agent or attorney,
describing the expenses for which the same were advanced and describing the
Trust Property.
(c) Upon the happening of any of the events set forth above, or during any
period of redemption after foreclosure sale, and prior to the
appointment of a receiver as hereinbefore provided, Beneficiary shall
have the right to collect the rents, issues, profits and other income
of every kind from the Trust Property and apply the same in the manner
hereinbefore provided for the application thereof by a receiver. The
rights set forth in this Subsection (c) shall be binding upon the
occupiers of the Trust Property from the date of filing by Beneficiary
in the office where this Deed of Trust is recorded, in the county in
which the Trust Property is located, of a notice of default in the
terms and conditions of this Deed of Trust and service of a copy of the
notice upon the occupiers of the Trust Property or as otherwise
provided under Arizona law. Enforcement hereof shall not cause
Beneficiary to be deemed a beneficiary in possession, unless it elects
in writing to be so deemed. For the purpose aforesaid, Beneficiary may
enter and take possession of the Trust Property, manage and operate the
same and take any action which, in Beneficiary's judgment, is necessary
or proper to conserve the value of the Trust Property. Beneficiary may
also take possession of, and for these purposes use, any and all of the
Property contained in the Trust Property.
(d) Beneficiary shall have, in addition to all other rights and remedies
provided herein and in the Other Loan Documents and at law or in
equity, the rights and remedies afforded by Arizona Revised Statutes
Section 33-702.B, without regard to the adequacy of the security or to
the solvency of Trustor or to whether Trustee or Beneficiary has
commenced to exercise any other right or remedy provided herein or in
any Other Loan Document or at law or in equity.
(e) The costs and expenses (including any receiver's fees and reasonable
attorneys' fees) incurred by Beneficiary pursuant to the powers herein
contained shall be immediately reimbursed by Trustor to Beneficiary on
demand, shall be secured hereby and shall bear interest from the date
incurred at the Default Rate. Beneficiary shall not be liable to
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account to Trustor for any action taken pursuant hereto, other than to
account for any rents actually received by Beneficiary.
Section 1.14. Estoppel Certificates. At any time and from time to time, within
three (3) business days after receipt from Beneficiary of a written request
therefor, Trustor shall prepare, execute and deliver to Beneficiary, and/or any
other party which Beneficiary may designate, an estoppel certificate stating:
(a) the amount of the unpaid principal balance and accrued interest secured by
this Deed of Trust on the date thereof; (b) the date upon which the last payment
secured by this Deed of Trust was made and the date the next payment secured by
this Deed of Trust is due; and (c) that the provisions of the Note, this Deed of
Trust and any Other Loan Documents described in said request have not been
amended or changed in any manner, that there are no defaults or events of
default then existing under the terms of the Note, this Deed of Trust or any
Other Loan Document described in said request, and that Trustor has no defenses,
claims or offsets against full enforcement thereof according to their terms, or
listing and describing any such amendments, changes, defaults, events of
default, defenses, claims or offsets which do exist.
Section 1.15. Hazardous Substances. Except for minute quantities used in the
ordinary course of cleaning and maintaining the Trust Property and disposed of
in accordance with all applicable Environmental Regulations, Trustor shall not
place, locate, produce, generate, create, store. treat, handle, transport,
incorporate, discharge, emit, spill, release, deposit or dispose of any
Hazardous Substance in, upon, under, over or from the Trust Property and shall
not permit any Hazardous Substance to be placed, located, produced, generated,
created, stored, treated, handled, transported, incorporated, discharged,
emitted, spilled, released, deposited, disposed of or to escape therein,
thereupon, thereunder, thereover or therefrom; and Trustor shall comply with all
Environmental Regulations which are applicable to the Trust Property. Trustor
agrees to promptly and properly remove and dispose of any Hazardous Substance
found on or in the Trust Property, at Trustor's sole cost and expense and in
compliance with all applicable Environmental Regulations.
At any time and from time to time, if Beneficiary so requests, Trustor shall
have any environmental assessment, review, audit and/or report relating to the
Trust Property heretofore provided by Trustor to Beneficiary updated and/or
amplified, at Trustor's sole cost and expense, by an engineer or scientist
acceptable to Beneficiary, or shall have such an assessment, review, audit
and/or report prepared for Beneficiary, at Trustor's sole cost and expense, if
none has previously been so provided.
Trustor shall indemnify Beneficiary, its directors, officers, employees, agents,
contractors, licensees, invitees, successors and assigns (hereinafter
collectively referred to as "Indemnified Parties") against, shall hold the
Indemnified Parties harmless from, and shall reimburse the Indemnified Parties
for, any and all claims, demands, judgments, penalties, liabilities, costs,
damages and expenses incurred by the Indemnified Parties, including court costs
and attorneys' fees (prior to trial, at trial and on appeal), in any action,
administrative proceeding or negotiations against or involving any of the
Indemnified Parties, resulting from any breach of the foregoing covenants, from
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the incorrectness or untruthfulness or any warranty or representation set forth
in Subsection 1.2(j) hereof, from a failure by Trustor to perform any of its
obligations hereunder with respect to any Hazardous Substance, or from the
discovery of any Hazardous Substance in, upon, under or over, or emanating from,
the Trust Property, it being the intent of Trustor and Beneficiary that the
Indemnified Parties shall have no liability for damage or injury to human
health, the environment or natural resources caused by, for abatement, clean-up,
removal or disposal of, or otherwise with respect to, Hazardous Substances by
virtue of the interest of Beneficiary in the Trust Property created hereby or as
the result of Beneficiary exercising any of its rights or remedies with respect
thereto hereunder, including but not limited to becoming the owner thereof by
foreclosure or conveyance in lieu of foreclosure.
The foregoing covenants, representations and warranties of Subsection 1.2(j) and
of this Section 1.15 shall be deemed continuing covenants, representations and
warranties for the benefit of the Indemnified Parties, including but not limited
to any transferee of the title of Beneficiary. Such indemnification shall
survive payment of the Note, but shall become null and void and of no further
force or effect in the event Beneficiary or any other party obtains title to the
Trust Property through foreclosure or exercise of power of sale under this Deed
of Trust or deed in lieu of foreclosure or exercise of power of sale. Any
amounts covered by the foregoing indemnification shall bear interest from the
date paid at the Default Rate and shall be secured hereby.
Section 1.16. Accessibility Regulations. Trustor covenants and agrees that it
will comply with all applicable Accessibility Regulations during the entire term
of this Deed of Trust. All future maintenance, renovation, repair and
construction conducted on the Premises shall all be completed in accordance with
all applicable Accessibility Regulations. Failure to comply with the provisions
of any Accessibility Regulation shall constitute an Event of Default under the
terms of this Deed of Trust and shall entitle the Beneficiary to exercise all
remedies available to it hereunder. Trustor hereby agrees to indemnify and hold
harmless the Indemnified Parties from and against any claims, losses, damages,
liabilities, judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees and costs in the investigation, defense and
settlement of claims or remediation) incurred by the Indemnified Parties as a
result of or in connection with violations of the Accessibility Regulations.
Trustor shall bear, pay and discharge, as and when the same become due and
payable, any and all such judgments or claims for damages, penalties or
otherwise, against the Indemnified Parties, shall hold the Indemnified Parties
harmless against all claims, losses, damages, liabilities, costs and expenses,
and shall assume the burden and expense of defending all suits, administrative
proceedings and negotiations of any description with any and all persons,
political subdivisions or government agencies arising out of any of the
occurrences set forth in this Section. Such indemnification shall survive
payment of the Note, but shall become null and void and of no further force or
effect in the event Beneficiary or any other party obtains title to the Trust
Property through foreclosure or exercise of power of sale under this Deed of
Trust or deed in lieu of foreclosure or exercise of power of sale.
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Section 1.17. Maintain Existence. Trustor agrees to maintain its existence as a
limited liability company under the laws of the State of Arizona and not to
terminate its existence during the term hereof, without the prior written
consent of Beneficiary.
ARTICLE II
TAKING OF PROPERTY
In case of a taking of or damage to all or any part of the Trust Property as a
result of, or a sale thereof in lieu of or in anticipation of, the exercise of
the power of condemnation or eminent domain, or the commencement of any
proceedings or negotiations which might result in such a taking, damage or sale,
Trustor shall promptly give Beneficiary written notice thereof, generally
describing the nature of such taking, damage, sale, proceedings or negotiations
and the nature and extent of the taking, damage or sale which has resulted or
might result therefrom, as the case may be, and Beneficiary shall have the right
to participate in such proceedings or negotiations. Should any of the Trust
Property be taken or damaged by exercise of the power of condemnation or eminent
domain, or be sold by private sale in lieu or in anticipation thereof, Trustor
does hereby irrevocably assign, set over and transfer to Beneficiary any award,
payment or other consideration for the property so taken, damaged or sold. Such
award, payment or consideration shall, at Beneficiary's option, be applied first
to the payment of all costs and expenses incurred by Beneficiary in obtaining
and preserving such award, payment or consideration, and second, at
Beneficiary's option, either to the reduction of the indebtedness hereby secured
by application thereof to said indebtedness, in any order which Beneficiary may
determine, whether then due and payable or not, without reinvestment charge, or
to the restoration or repair of the Trust Property, without affecting the lien
of this Deed of Trust or the obligations of Trustor hereunder.
If (a) an Event of Default then exists hereunder, or (b) Trustor does not
promptly and in good faith compromise, settle and collect all awards, payments
or consideration for the property so taken, damaged or sold, Beneficiary is
authorized, at its option, in the name of Trustor or in its own name, to
compromise, settle, collect and receipt for all awards, payments or
consideration for the property so taken, damaged or sold. The amount of any such
compromise or settlement shall always be subject to Beneficiary's approval.
Trustor agrees to pay all costs and expenses incurred by Beneficiary in
connection therewith, including court costs and attorneys' fees (prior to trial,
at trial and on appeal), on demand, which costs and expenses shall also be
secured hereby and shall bear interest from the date paid at the Default Rate,
but Beneficiary shall not be liable to Trustor for any failure by Beneficiary to
collect or to exercise diligence in collecting any such award, payment or
consideration.
Interest upon the entire indebtedness secured hereby shall continue until any
such award, payment or consideration is received and applied by Beneficiary to
said indebtedness, and, pending a decision as to the proper application of said
award, payment or consideration, and pending the completion of any such repairs
or restoration, Beneficiary shall not be liable for interest thereon. Trustor
will, in good faith and with due diligence, file and prosecute what would,
absent this assignment, be its claims for any such award, payment or
consideration and will cause the same to be collected and paid over to
Beneficiary. If Beneficiary elects to apply any such award, payment or
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consideration to the restoration or repair of the Trust Property, it shall not
be liable to supervise such restoration or repair or to supervise the
disbursement of such award, payment or consideration therefor, but such
disbursement shall proceed in a manner acceptable to Beneficiary, which shall be
similar to the manner in which major national banks permit construction loan
advances, and which shall be designed to include reasonable controls to assure
that such restoration or repair will be promptly completed in a workmanlike
manner and paid for in full, free of mechanics' liens. In such event, Trustor
shall deposit with Beneficiary, prior to commencing any such restoration or
repair, the amount, if any, by which the cost of such restoration or repair
exceeds the amount of such award, payment or consideration, which deposited
amount shall be disbursed to pay costs of such restoration or repair prior to,
and in the same manner as, such award, payment or consideration. Any surplus
which may remain after payment of all costs of restoration or repair may, at the
option of Beneficiary, be applied in reduction of the indebtedness hereby
secured, in any order which Beneficiary may determine, whether then matured or
to mature in the future, without reinvestment charge, or be paid to Trustor, as
its interest may appear, the choice of application to be solely at the
discretion of Beneficiary.
ARTICLE III
DEFAULT AND REMEDIES THEREFOR
Section 3.1. Events of Default. If any one or more of the following events
(herein referred to as "Events of Default") shall occur:
(a) Default in the payment of any payment of principal, interest and/or any
other sum of money required to be paid pursuant to the Note, to this
Deed of Trust, to any other instrument securing the Note, to any Lease
or to the Commitment, as and when due; provided, however, that with
respect to any amount or sum due to Beneficiary as a result of
Beneficiary having made an advance on behalf of Trustor which is to be
reimbursed by Trustor to Beneficiary, a default will not be deemed to
have occurred until Beneficiary has given written notice to Trustor of
such advance, and Trustor has not fully reimbursed Beneficiary together
with any interest as is required to be paid thereon, within three (3)
business days of the date of such notice; or
(b) Default by Trustor under any term, covenant or condition contained in
Section 1.7, 1.8 or Section 1.12 of this Deed of Trust; or
(c) Default by Trustor under any term, covenant or condition of this Deed
of Trust, of the Note, of any Other Loan Document, of any Lease or of
the Commitment, other than a default described in Subsections (a) and
(b) above, which default shall not be remedied within fifteen (15) days
after notice thereof by Beneficiary,or such longer period as is
reasonably required, not to exceed thirty (30) days, provided that such
default is capable of cure other than by the payment of money and
further provided that Trustor is diligently prosecuting such cure to
completion; or
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(d) Any representation or warranty made by or on behalf of Trustor or any
Guarantor or any Member to Beneficiary in connection with the loan
secured hereby proves to be untrue in any material respect; or
(e) Trustor or any Guarantor shall commit an act of bankruptcy, shall file
a voluntary petition in a bankruptcy, reorganization, composition,
readjustment, arrangement, insolvency, liquidation, dissolution or
similar proceeding under any present or future statute, law or
regulation, shall consent to voluntary or involuntary adjudication in
bankruptcy or to reorganization, or shall be adjudicated bankrupt or
insolvent under any applicable law or laws, or admits, in writing, to
having become insolvent or to be unable to pay its debts as they become
due, or becomes unable to pay its debts as they mature, or makes an
assignment for the benefit of its creditors, or is dissolved,
liquidated, terminated or merged, or if it applies for, or if it
consents to, the appointment of a trustee or receiver for the Trust
Property or for any portion of its assets; or
(f) A trustee or receiver is appointed for the Trust Property, for Trustor,
for any Guarantor or for any portion of any of Trustor's or any
Guarantor's assets, or an involuntary petition in bankruptcy or
insolvency is filed against Trustor or any Guarantor, and is not
discharged or dismissed within thirty (30) days after such appointment
or filing; or
(g) Any judgment is entered in any court against Trustor or any Guarantor
and is not satisfied in full within thirty (30) days after all rights
to appeal from the same have expired, or any writ of execution or
attachment or similar process is issued or levied against any part of
the Trust Property or any interest therein; or
(h) Default by any Guarantor under any term, covenant, or condition of the
Guaranty executed by them dated as of the date hereof, which default
shall have extended beyond any period of grace provided therein;
then, in any such case, Beneficiary may, at its option, without notice, declare
the principal of and the accrued interest on the Note, and all sums advanced
hereunder, with interest thereon, to be forthwith due and payable, and thereupon
the Note and all other indebtedness secured hereby, including both principal and
all unpaid interest accrued thereon, including all applicable late payment
charges and reinvestment charges, and including all sums advanced hereunder and
interest thereon, shall be and become immediately due and payable without
presentment, demand or notice of any kind. Time is of the essence hereof.
Section 3.2. Remedies. In the event of the happening of an Event of Default,
or in case the principal of the Note shall have become due and payable in full,
whether by lapse of time or by acceleration, then and in every such case the
holder of the Note may, at its option,
(a) Proceed to protect and enforce its rights by a suit or suits in equity
or at law for the specific performance of any covenant or agreement
contained herein, in the Note or in any Other Loan Document, or in aid
of the execution of any right, power or remedy herein or therein
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granted, or for the foreclosure of this Deed of Trust, or for damages,
or to collect the indebtedness secured hereby, or for the enforcement
of any other appropriate legal, equitable, statutory or contractual
remedy, and shall be entitled to the appointment of a receiver to
operate and protect the Trust Property and to collect rents due under
any Lease, and/or
(b) (1) cause Trustee to sell the Trust Property, and all estate, right,
title and interest, claim and demand therein, and right of redemption
thereof, in such order as Beneficiary may choose, all, in accordance
with applicable law, or (2) institute proceedings for the complete or
partial foreclosure of the lien of this Deed of Trust upon the Trust
Property as a mortgage, in either case, Trustor to remain liable for
any deficiency, if permitted by law, and to the extent permitted by
Section 4.11 of this Deed of Trust.
Any such sale or sales made under this Deed of Trust, whether made
under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and
sale, shall operate to divest all the estate, right, title, interest,
claim and demand whatsoever, whether at law or in equity, of Trustor in
and to the properties and rights so sold, and shall be a perpetual bar
both at law and in equity against Trustor and against any and all
persons claiming or who may claim the same, or any part thereof from,
through or under Trustor.
Further, the holder of the Note, in exercising its rights hereunder, shall also
have, without limitation, all of the rights and remedies provided by the Arizona
Uniform Commercial Code, including the right to proceed under the Arizona
Uniform Commercial Code provisions governing default as to any fixtures,
equipment, instruments, general intangibles, accounts, contract rights, claims
or personal property which may be included in or related to the Trust Property
and as to any deposits, policies, unearned premiums, proceeds, awards, payments
or consideration assigned to Beneficiary as further security hereunder,
separately from the real estate included in the Trust Property, or to proceed as
to any or all of such property in accordance with its rights and remedies in
respect of said real estate. If Beneficiary should elect to proceed separately
as to any such property, Trustor agrees to make such property available to
Beneficiary at a place or places reasonably acceptable to Beneficiary, and, if
any notification of intended disposition of any of such property is required by
law, such notification shall be deemed commercially reasonable and reasonably
and properly given if mailed at least ten (10) (days before such disposition in
the manner below provided.
Section 3.3. Purchase by Beneficiary. In case of any sale of any of the Trust
Property pursuant to the power of sale contained herein or pursuant to any
judgment or decree of any court or otherwise in connection with the enforcement
of any of the terms of this Deed of Trust, Beneficiary, its successors or
assigns, may become the purchaser, and, for the purpose of making settlement for
or payment of the purchase price, shall be entitled to turn in and use the Note
and any claims for interest accrued and unpaid thereon, late payment charges and
reinvestment charges, together with additions to the debt accrued, and interest
thereon, if any, in order that there may be credited as paid on the purchase
price, at Beneficiary's option, any sum then due hereunder and/or under the
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Note, including principal and interest thereon, late payment charges,
reinvestment charges, and any accrued additions to the deed of trust debt and
interest thereon, or any portion thereof.
Section 3.4. Trustee's Sale. In the event Beneficiary elects to have the Trust
Property sold under the Trustee's power of sale, Beneficiary shall deliver to
Trustee written notice of the breach and the nature thereof, and of its election
to cause the Trust Property to be sold by Trustee at one or more sales.
Thereafter, Trustee shall sell, after giving proper notice in the manner
required by law, the Trust Property at public auction at the time and place
fixed by it in the notice of Trustee's sale, to the highest bidder for cash in
lawful money of the United States, payable in accordance with law. Trustee may
postpone or continue the sale from time to time in the manner provided by law.
Trustee shall deliver to the purchaser its deed conveying the property sold, but
without any covenant or warranty, express or implied. Any persons, including
Trustor, Trustee or Beneficiary, may purchase at the sale.
Section 3.5. Remedies Cumulative. Each and every right, power or remedy herein
specifically given shall be cumulative with and in addition to every other
right, power or remedy, express or implied, given or now or hereafter existing
at law, in equity, by statute, in the Note, herein or in any Other Loan
Document, and each and every right, power and remedy herein specifically given
or otherwise so existing may be exercised concurrently or separately, from time
to time, as often and in such order as may be deemed expedient by Beneficiary or
the holder of the Note, and the exercise or the beginning of the exercise of one
right, power or remedy shall not be deemed a waiver of the right to exercise at
the same time or thereafter any other right, power or remedy. No delay or
omission of Beneficiary in the exercise of any such right, power or remedy shall
impair any such right, power or remedy or any other right, power or remedy of
Beneficiary or be construed to be a waiver of any default or acquiescence
therein. Beneficiary shall have all rights, powers and remedies available under
the law in effect now and/or at the time such rights, powers and remedies are
sought to be enforced, whether or not they are available under the law in effect
on the date hereof.
Section 3.6. Use of Proceeds. The purchase money proceeds and avails of any
trustee's sale or foreclosure sale of the Trust Property, or any part thereof,
and the proceeds and avails of any other remedy hereunder, unless to the
contrary provided by Section 1.13 hereof, shall, to the extent not inconsistent
with the provisions of the law, be paid and applied as follows:
(a) First, to the payment of costs, charges and expenses of such trustee's
sale or foreclosure proceedings and sale and of all proper expenses
(including court costs and maximum attorneys' fees permitted by law),
liabilities and advances incurred or made in connection therewith or
otherwise incurred or made hereunder by Beneficiary, and to reimburse
Beneficiary for payment of all Impositions, Liens and encumbrances
superior to the lien of these presents which have been paid by
Beneficiary;
(b) Second, to the payment to Beneficiary of the amount then owing and
unpaid under the Note and this Deed of Trust for principal, interest,
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advances and interest thereon, reinvestment charges and late payment
charges and, in case any such proceeds shall be insufficient to pay the
whole amount so due, then to the payment of such items in any order
determined by Beneficiary; and
(c) Third, any excess to be paid to Trustor, its successors or assigns, or
to whomsoever may be lawfully entitled to receive the same.
Trustee waives the right to elect to deposit the balance (if any) of the
proceeds of the sale with the clerk of superior court, as provided in Arizona
Revised Statutes Section 33-812, except as to that portion remaining after
payment of the costs and expenses of the sale, including attorneys' fees
incurred by Beneficiary and Trustee, payment of the secured indebtedness, and
all other obligations provided in this Deed of Trust.
Section 3.7. Restoration. In case Beneficiary shall have proceeded to enforce
any right, remedy or power under this Deed of Trust by foreclosure, sale, entry
or otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely to Beneficiary, then and in
every such case Trustor and Beneficiary shall be restored to their former
positions and rights hereunder with respect to the Trust Property, and all
rights, remedies and powers of Beneficiary shall continue in full force and
effect as if no such proceedings had been initiated.
Section 3.8. Proof of Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, readjustment, composition, dissolution,
liquidation, termination or other judicial proceedings affecting Trustor, its
creditors or its property, Beneficiary, to the extent permitted by law, shall be
entitled to file such proofs of claim and other documents as may be necessary or
advisable in order to have its claims allowed in such proceedings for the entire
amount due and payable under the Note, this Deed of Trust and any Other Loan
Document, at the date of institution of such proceedings, and for any additional
amounts which may become due and payable hereunder and thereunder after such
date, including but not limited to Beneficiary's costs, expenses and attorneys'
fees incurred in connection therewith.
Section 3.9. Marshaling of Assets. Trustor, for itself and on behalf of all
persons, parties and entities which may claim under Trustor, hereby waives all
requirements of law relating to the marshaling of assets, if any, which would be
applicable in connection with the enforcement by Beneficiary of its remedies for
an Event of Default hereunder, absent this waiver.
Section 3.10. No Waiver. No waiver of any provision hereof shall be implied
from the conduct of the parties. Any such waiver must be in writing and must be
signed by the party against which such waiver is sought to be enforced. The
waiver or release by Beneficiary of any breach of the provisions, covenants and
conditions set forth herein on the part of Trustor to be kept and performed
shall not be a waiver or release of any other breach, preceding, contemporaneous
or subsequent, of the same or any other provision, covenant or condition
contained herein. The subsequent acceptance of any sum in payment of any
indebtedness secured hereby or any other payment hereunder by Trustor to
Beneficiary shall not be construed to be a waiver or release of any preceding
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breach by Trustor of any provision, covenant or condition of this Deed of Trust,
other than the failure of Trustor to pay the particular sum so accepted,
regardless of Beneficiary's knowledge of such preceding breach at the time of
acceptance of such payment. No payment by Trustor or receipt by Beneficiary of a
lesser amount than the full amount secured hereby shall be deemed to be other
than on account of the sums due and payable hereunder, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, and Beneficiary may accept any check or
payment without prejudice to Beneficiary's right to recover the balance of such
sums or to pursue any other remedy provided in this Deed of Trust. The consent
by Beneficiary to any matter or event requiring such consent shall not
constitute a waiver of the necessity for such consent to any subsequent matter
or event.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Successors and Assigns. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include and apply to the
successors and assigns of such party, subject to the provisions of Section 1.12
hereof; and all covenants, promises and agreements by or on behalf of Trustor in
this Deed of Trust contained shall bind Trustor and also its successors and
assigns and shall inure to the benefit of Beneficiary and its successors and
assigns, whether elsewhere herein so expressed or not. All representations and
warranties contained herein or otherwise heretofore made by Trustor or any
Guarantor or Member, to Beneficiary shall survive the execution and delivery
hereof. The singular of all terms used herein shall include the plural, the
plural shall include the singular, and the use of any gender herein shall
include all other genders, where the context so requires or permits.
Section 4.2. Severability. The unenforceability or invalidity of any provision
or provisions of this Deed of Trust as to any persons or circumstances shall not
render that provision nor any other provision or provisions herein contained
unenforceable or invalid as to any other persons or circumstances, and all
provisions hereof, in all other respects, shall remain valid and enforceable.
Beneficiary shall be subrogated for further security to the lien, whether or not
released of record, of any and all encumbrances paid out of the proceeds of the
Note or out of any advances made by Beneficiary hereunder.
Section 4.3. Notices. All notices and elections provided for herein shall be in
writing and shall be deemed to have been given (unless otherwise required by the
specific provisions hereof or by law in respect to any matter) when deposited in
the United States mail, registered or certified, return receipt requested,
postage prepaid, addressed as follows:
If to Trustor: LOST DUTCHMAN PARKS, LLC,
4614 S. Kachina Drive
Tempe, Arizona 85282
Attn: Norman Andrus
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If to Beneficiary: ASSET INVESTORS OPERATING PARTNERSHIP, L.P.
1873 S. Bellair Street
17th Floor
Denver, Colorado 80222
Attn: Terry Considine
or addressed to any such party at such other address as such party shall
hereafter furnish by written notice to the other party hereto, at least ten (10)
days prior to the effective date of said change in address.
Section 4.4. Obligation to Defend. Trustor, at its sole cost and expense, shall
appear in and defend any dispute, action, suit or proceeding purporting to
relate to or affect the Note or the security therefor, including but not limited
to this Deed of Trust. If any action or proceeding relating to or affecting the
Note, this Deed of Trust or the Trust Property is commenced or threatened, to
which action or proceeding Beneficiary is made a party, or in which it becomes
necessary or desirable, in Beneficiary's opinion, to defend or uphold, or to
consider defending or upholding, the lien of this Deed of Trust, or to protect
the Trust Property or any part thereof, or to exercise, or to obtain the right
to exercise, any of Beneficiary's rights and remedies hereunder, Including any
foreclosure or commencement of foreclosure proceedings or probate, bankruptcy,
insolvency, arrangement, reorganization or other debtor-relief proceedings, or
with respect to which Beneficiary otherwise incurs costs or expenses, all sums
paid by Beneficiary in order to determine the merits thereof, to establish or
defend the rights and liens of this Deed of Trust, to protect the Trust Property
or any part thereof, and to exercise, or to obtain the right to exercise, any of
Beneficiary's rights and remedies hereunder, and/or otherwise incurred by
Beneficiary in connection therewith (including reasonable attorneys' fees and
costs and allowances prior to trial, at trial and on appeal), and whether suit
be brought or not, and whether or not Beneficiary prevails therein, shall be
paid, upon demand, to Beneficiary by Trustor, together with interest thereon at
the Default Rate from the date paid, and any such sum or sums shall be secured
hereby.
Section 4.5. Modification. In the event Beneficiary (a) grants any extension of
time or forbearance with respect to the payment of any indebtedness secured by
this Deed of Trust; (b) takes other or additional security for the payment
thereof; (c) waives or fails to exercise any right, power or remedy granted
herein, in the Note or in any other document which secures or refers to the
Note; (d) grants any release, with or without consideration, of the whole or any
part of the security for the payment of the indebtedness secured hereby or the
release of any person, party or entity liable for payment of said indebtedness;
and/or (e) amends or modifies in any respect any of the terms and provisions
hereof, of the Note (including substitution of another note) or of any Other
Loan Document; then, and in any such event, such act or omission to act shall
not release Trustor under any covenant of this Deed of Trust or of the Note, nor
preclude Beneficiary from exercising any right, power or privilege herein or
therein granted or intended to be granted, and shall not in any way impair or
affect the lien or priority of this Deed of Trust. In the event any additional
real property, improvements, leases, fixtures or personal property not herein
specifically identified shall be or become a part of the Trust Property, then
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this Deed of Trust shall immediately attach to and constitute a lien against or
security interest in such additional items, as appropriate, without further act
or deed of either party hereto.
Section 4.6. Governing Law. This instrument shall be governed by and
interpreted in accordance with the laws of the State of Arizona. Trustor agrees
to pay an effective rate of interest which is the stated rate provided for in
the Note plus any additional rate of interest resulting from any charges of
interest or in the nature of interest paid or to be paid in connection with the
loan evidenced thereby, including without limitation, all amounts paid by or on
behalf of Trustor to Beneficiary pursuant to the terms of the Commitment.
Notwithstanding any provision herein, in the Note or in any Other Loan Document,
the total liability for payments in the nature of interest hereunder and
thereunder shall not exceed interest at the maximum rate permitted by the laws
of the State of Arizona on the indebtedness secured hereby, if any, and any
amounts paid in excess of said maximum rate shall be refunded to Trustor, and
Trustor hereby agrees to accept such refund. This instrument shall be construed
in accordance with its intent and with the fair meaning of its provisions, and
without regard to any presumption on other rule of interpretation requiring
construction thereof against the party which caused the same to be drafted.
Section 4.7. Execution in Counterparts. This Deed of Trust may be executed
simultaneously in two (2) or more identical counterparts. each of which,
standing alone, shall be an original, but all of which shall constitute but one
(1) agreement.
Section 4.8. Fixture Filing Statement. This instrument shall be deemed to be a
Fixture Financing Statement within the meaning of the Arizona Uniform Commercial
Code:
a. Name and address of Debtor LOST DUTCHMAN PARKS, LLC,
4614 S. Kachina Drive
Tempe, Arizona 85282
Attn: Norman Andrus
b. Name and address of ASSET INVESTORS OPERATING
Secured Party: PARTNERSHIP, L.P.
1873 S. Bellair Street
17th Floor
Denver, Colorado 80222
Attn: Terry Considine
c. Description of the types See page 2 above.
(or items) of property
covered by this Financing
Statement:
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d. Description of real estate See Exhibit A hereto.
to which the collateral is
attached or upon which it
is or will be located:
Some of the above-described collateral is or is to become fixtures upon the
above-described real estate, and this Financing Statement is to be filed for
record in the public real estate records.
Section 4.9. Notice to Trustor. The undersigned Trustor requests that a copy of
any notice of sale be mailed to it at its mailing address, as set forth above.
Section 4.10. Accurate Reflection of Agreements. Trustor hereby acknowledges
and agrees that the Note, the Commitment and the Other Loan Documents accurately
reflect the agreements and understandings of the parties thereto with respect to
the subject matter thereof, and hereby waives any claims against Beneficiary
that Trustor may now have or may hereafter acquire to the effect that the actual
agreements and understandings of the parties to the Note, the Commitment and the
Other Loan Documents, with respect to the subject matter thereof, may not be
accurately set forth in the Note, the Commitment and the Other Loan Documents.
Section 4.11. Limited Recourse. Notwithstanding anything to the contrary
hereinabove set forth, Beneficiary acknowledges and agrees that Trustor's
liability under the Note, this Deed of Trust and the Other Loan Documents is
limited as expressly set forth in the Note, the terms of which are hereby
incorporated by this reference.
Section 4.12. Descriptive Headings. The descriptive headings of the several
sections of this Deed of Trust are inserted for convenience only and do not
constitute a part of this Deed of Trust.
ARTICLE V
OTHER DUTIES AND RIGHTS OF TRUSTEES
Section 5.1. Trustee Compensation. Trustee shall be entitled to reasonable
compensation for all services rendered or expenses incurred in the
administration or execution of the trust created by this Deed of Trust and
Trustor agrees to pay the same, subject to all statutory limitations. Trustee
and Beneficiary shall be indemnified, held harmless and reimbursed by Trustor
for any liability, damage or expense, including attorneys' fees and amounts paid
in settlement, that either or both of them may incur or sustain in the execution
of this Deed of Trust, or in the doing of any act that either or both of them
are required or permitted to do by the terms of this Deed of Trust or by law.
Section 5.2. Fees. For any statement requested by Trustor regarding the
obligations secured, the ownership of the Trust Property, the liens on the Trust
Property, the amounts held in any impound or reserve fund established, the
amount required to reinstate the Deed of Trust or similar matters, Beneficiary
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or Trustee may charge a reasonable fee, not to exceed the maximum amount
permitted by law at the time of the request.
Section 5.3. Trustee's Powers. At any time or from time to time, upon written
request of Beneficiary, without affecting the personal liability of any person
for payment of the secured indebtedness, and without affecting the security for
the full amounts secured by this Deed of Trust, Trustee may:
(a) Release and reconvey all or any part of the Trust Property;
(b) Consent to the making and recording, or either, of any map or plat of
all or part of the Trust Property;
(c) Join in granting any easement on the Trust Property; or
(d) Join in or consent to any extension agreement or any agreement
subordinating the lien, encumbrance or charge created by this Deed of
Trust.
Section 5.4. Successor Trustee. Beneficiary may, in its discretion, appoint a
successor trustee in the manner prescribed by law. Trustee may resign by
recording a notice of resignation and by mailing or delivering notice of
resignation to Beneficiary and to Trustor in the manner prescribed by law. Upon
Trustee's resignation, Beneficiary may appoint a successor trustee, which
appointment shall constitute a substitution of trustee upon the mailing and
recording of written notice by Beneficiary in the manner prescribed by law for
the substitution of a trustee of a deed of trust. A successor trustee shall,
without conveyance from the predecessor trustee, succeed to all the
predecessor's title, estate, rights, powers and duties.
Section 5.5. Acceptance. Trustee accepts this Trust when this Deed of Trust,
duly executed and acknowledged, is made a public record as provided by law.
Trustee is not obligated to notify any party of a pending sale under any other
deed of trust or of any action or proceeding in which Trustor, Beneficiary or
Trustee shall be a party, unless brought by Trustee.
Section 5.6. Costs. Trustor shall pay all costs, fees and expenses of this Deed
of Trust, including, without limiting the generality of the foregoing, the fees
of Trustee for issuance of any deed of partial release and partial reconveyance
or deed of release and full conveyance. Trustor shall pay all lawful charges,
costs and expenses, including charges for the preparation of title reports and
attorneys' fees incurred by Beneficiary and Trustee, in the event of
reinstatement of this Deed of Trust following default in the performance of
Trustor's obligations. Notwithstanding any other provision hereof, the foregoing
obligations shall be subject to any statutory limitation on the amount of such
fees and costs.
ARTICLE VI
CONTINGENT INTEREST AGREEMENT
SECURED BY DEED OF TRUST
32
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Trustor further agrees and promises to pay to the order of Beneficiary
such amounts as hereinafter described as "Additional Interest," which Additional
Interest shall be in addition to and not in substitution for all principal,
interest and other charges payable by Trustor under the Note and any other sums
payable by Trustor to Beneficiary. The obligation to pay the Additional Interest
shall continue notwithstanding the payment in full of the Note. (For convenience
all of the foregoing together with this Deed of Trust and the Other Loan
Documents shall hereinafter collectively be referred to as the "Loan
Documents.")
1. Definitions. As used in this Article certain terms shall have the
meanings hereinafter set forth:
"Affiliate" shall mean any Person directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with the Person in question, which, in the case of a Person which is a
partnership, shall include each of the constituent partners thereof. The term
"control," as used in the immediately preceding sentence, means, with respect to
a Person that is a corporation, the right to the exercise, directly or
indirectly, of more than 50% of the voting rights attributable to the shares of
the controlled corporation, and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled Person;
"Improvements" shall mean those certain improvements constructed
upon the Land, and used in the operation of those businesses commonly known as
the Sun Valley, Apache Acres, Blue Star and Lost Dutchman Mobile Home Parks;
"Land" shall mean that certain land encumbered by the Deed of Trust
as of the date hereof;
"Leases" shall mean all leases and occupancy agreements, and all
amendments and extensions and renewals thereof or thereto, covering any portion
of the Property;
"Lessees" shall mean all lessees (or permitted assignees or
subtenants at any level thereof) under Leases and all other tenants or occupants
of any portion of the Property;
"Person" shall mean an individual, partnership, corporation, trust,
unincorporated association, or other entity or association;
"Property" shall mean the Land and the Improvements located
thereon, collectively; and
2. Definition of Additional Interest. Trustor shall pay to Beneficiary,
in addition to the principal, interest and other charges payable by Trustor
under the Note and all other sums payable by Trustor to Beneficiary as
additional interest on the Loan ("Additional Interest"), at the times and in the
33
<PAGE>
manner set forth below in lawful money of the United States, an amount equal to
the Additional Interest Amount (as defined hereinbelow) and to the Contingent
Profits Interest (as defined hereinbelow).
(a) "Additional Interest Amount" shall mean three percent (3%) of
the Gross Revenues (defined below), until the Note shall be paid in full, and
thereupon, the Additional Interest Amount shall be thirteen percent (13%) of the
Gross Revenues.
(b) "Contingent Profits Interest" shall mean an amount equal to
fifty percent (50%) of the Net Sales Profits (as hereinafter defined).
(c) Trustor acknowledges that Trustor and Beneficiary have
conferred specifically concerning the contingent and uncertain nature of the
Additional Interest Amount and the Contingent Profits Interest and that Trustor
and Beneficiary understand and agree that the Additional Interest Amount,
Contingent Profits Interest and each element thereof payable as a result of this
Agreement is speculative in nature, and both the payment and amount, if any, of
each element of the Additional Interest Amount and the Contingent Profits
Interest is dependent on a number of contingencies which are not within
Beneficiary's control.
3. Definition of Gross Revenues. For purposes of this Agreement, the
term "Gross Revenues" shall mean all gross income, rents, issues, profits,
revenues and consideration, of whatever form or nature, received by or paid to
or for the account or benefit of Trustor, its officers, agents, employees, or
shareholders or any Affiliate of Trustor, from any and all sources, resulting
from or attributable to the ownership, operation, leasing, occupancy or use of
the Property arising during the period from the date of this Agreement,
determined on the basis of sound cash basis accounting practices applied on a
consistent basis.
Notwithstanding anything included within the above definition of "Gross
Revenues," there shall be excluded from Gross Revenues: (1) any security or
other deposits of the Lessee under any Lease unless and until such deposit or
deposits are actually applied to rent owing under said Lease; (2) the proceeds
of any financing or refinancing with respect to all or any part of the Property;
and (3) the proceeds of any sale or other disposition (excluding Leases for
occupancy purposes only) of all or any portion of the Property.
It is understood and agreed that no income or expense used in
calculating Gross Revenues shall be used in calculating Net Sales Profits.
4. Definition of Net Sales Profits. As used herein "Net Sales Profits"
shall mean the "Gross Sales Refinancing Proceeds" (as hereinafter defined) from
the sale or refinancing of the Property minus the sums of (a) "Approved Closing
Costs" (as hereinafter defined) and (b) "Approved Deductions" (as hereinafter
defined).
(a) "Gross Sales Refinancing Proceeds" shall mean gross proceeds of
whatever form or nature, including without limitation (i) cash and the cash
equivalent of the fair market value of any non-cash consideration received in
lieu of cash (including the present value of any promissory note received as
34
<PAGE>
part of the proceeds of the sale, transfer, conveyance or refinancing of the
Property, such present value to be determined by Beneficiary in its reasonable
discretion), payable directly or indirectly to or for the benefit or account of
the Trustor, its officers, agents, employees or shareholders, or any Affiliate
of Trustor from or with respect to the sale, transfer or conveyance of the
Property (provided, nothing herein shall be construed to authorize Trustor to
accept any consideration other than cash consideration in connection with the
sale of the Property) and (ii) including with respect to a condemnation or
taking in eminent domain of any part of the Property or any interest therein, or
a conveyance in lieu thereof, the entire condemnation award or compensation
payable in connection with such taking or conveyance (including without
limitation any amounts attributable to the value of any unexpired Lease which
are otherwise payable to an Affiliate of Trustor or any of Trustor's officers,
agents, employees or shareholders), and (iii) including in the case of any
damage or injury to the Property covered by insurance, in the event Beneficiary
does not elect to allow any insurance payments, awards, proceeds, compensation
claims or recovery related thereto (the "Insurance Proceeds") to be applied to
the restoration of the Property pursuant to the provisions of Section 1.8 of the
Deed of Trust, but rather elects to apply the same to the payment or prepayment
of the indebtedness secured thereby, any and all Insurance Proceeds with respect
to such damage or injury to the Property, whether direct or consequential.
Trustor agrees that any refinancing shall be limited in the amount sufficient
only to repay the Note and any other indebtedness secured by the encumbrance
against the Property (which encumbrance is deemed senior to this Deed of Trust).
(b) "Approved Closing Costs" shall mean: (i) costs of title
insurance premiums, transfer taxes, escrow and recording fees and other usual
and ordinary closing costs which are customarily paid by the seller in Maricopa
County, in each case actually paid or payable by Trustor an pre-approved by
Beneficiary in writing (which approval will not be unreasonably withheld, and
(ii) a sales commission or fee of not to exceed three percent (3%) of the total
purchase price for the Property.
(c) "Approved Deductions" shall mean:
(1) Principal Indebtedness. The Principal Balance of
the Loan, which is $4,601,566.14 as of the date hereof, plus the
principal balance of the encumbrances against the Property as of the
date hereof, which the Trustor represents and warrants to be
$5,398,433.86, for at Total Loan amount of $10,000,000.00.
(2) Interest Expense. Interest and any and all other
amounts payable under the Note, the Deed of Trust, and/or any other
agreement or instrument which secures, evidences or refers to the Loan,
other than Additional Interest arising hereunder, which has accrued on
or after the date hereof.
5. Deposit of Rents/Reserves. As long as this Agreement is in effect
the Trustor covenants, warrants, and agrees that all Gross Revenues received by
the Trustor or its officers, agents, employees or shareholders, or any
Affiliate, shall be deposited with Beneficiary in accordance with the terms of
35
<PAGE>
the Security Agreement and Lockbox Agreement, and shall be pledged as additional
security for Trustor's obligations under this Agreement, the Note and the Deed
of Trust. All Gross Revenues shall be used only for (a) Expenses unless other
uses are approved by the Beneficiary in writing, and (b) repayment by the
Trustor of the Loan. Such funds shall be disbursed for the payment of Expenses
in accordance with the Security Agreement and Lockbox Agreement.
6. Payment of Indebtedness/Additional Interest Upon Sale or Refinance.
(a) Upon the sale or refinance of the Property, one hundred percent
(100%) of the Net Sale Proceeds (the term "Net Sales Proceeds" shall mean Gross
Sale Proceeds less Approved Closing Costs) shall be applied as follows:
First, to prepay the principal, interest, and other indebtedness
outstanding under the Loan Documents, except for Additional Interest, in such
manner and in such order as the Beneficiary, in its sole discretion, may
determine.
Second, provided Trustor is not in default under the Loan Documents
to be reimbursement of Trustor for any Expense Advances made by Trustor during
the term of this Agreement;
Third, to the payment of any Additional Interest, including
Contingent Profits Interest owing to Beneficiary under this Agreement; and
Fourth, the remainder, if any, to Trustor or any other Person
legally entitled thereto.
(b) All accrued but unpaid Additional Interest shall be due and
payable upon the occurrence of one or more of the following events:
(1) a default occurs under this Agreement or the
Note, the Deed of Trust, or any other Loan Document, which is not fully
cured within the time, if any, provided for cure herein or therein, and
Beneficiary elects to accelerate the maturity date of the Note on
account thereof (hereinafter a "Default"); or
(2) the sale or refinance of the Property.
(c) Notwithstanding anything contained herein to the contrary, no
Net Sale Proceeds from the sale or refinance of the Property shall be paid to
Trustor until the outstanding Principal Balance of the Note together with all
accrued but unpaid interest thereon, and all other indebtedness under the Note,
the Deed of Trust, the Other Loan Documents have been paid and discharged in
full.
7. Books and Accounting.
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<PAGE>
(a) Fiscal Year Statements. Within fifteen (15) days of the close
of each calendar month and within sixty (60) days after the close of each Fiscal
Year of Trustor (as hereinafter defined) Trustor shall furnish to Beneficiary a
statement of operation of the Property for such month or Fiscal Year, as the
case may be, showing in reasonable detail and in a format approved by
Beneficiary the Gross Revenues, and Net Sales Proceeds for the Property for such
period as well as all data necessary for the calculation of any amounts, which
statement shall be certified to by the president of Trustor to have been
prepared in accordance with the terms of this Agreement and to present correctly
in accordance with such terms the items shown therein; and in the case of the
annual statement, financial statements and schedules, including a balance sheet
and statement of operations for the Property for such Fiscal Year, prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with past practices and bearing the unqualified opinion of a firm of
independent certified public accountants satisfactory to Beneficiary, covering
the operations of the Property and including also all items necessary to
calculate Gross Revenues and Net Sales Proceeds for such Fiscal Year on the cash
basis provided for herein. Trustor's "Fiscal Year" shall mean each twelve (12)
month period beginning on January 1, and ending on the next December 31, however
the first Fiscal Year shall end December 31, 1997.
(b) Books and Records. The Trustor shall keep and maintain at all
times at the address of the Trustor designated in the Deed of Trust proper and
accurate books, records, and accounts reflecting all items of income and
expenses in connection with (a) the operation of the Property or in connection
with any services, equipment or furnishings provided with respect to such
operation of the Property, (b) the sale or refinance of the Property, and (c)
such other information or data reasonably necessary to calculate Net Sales
Proceeds and Net Sales Profits. The Beneficiary or its designee shall have the
right from time to time at all times during normal business hours to examine
such books, records, and accounts at the office of the undersigned, for the
purpose of verifying the accuracy of the Contingent Fees paid or payable
hereunder.
(c) Trustor's Certificate. Trustor shall supply the Beneficiary
with copies of all documents or instruments which produce or will produce Net
Sales Proceeds, Net Sales Profits as and when executed, and will, from time to
time, as and when required by the Beneficiary, prepare and execute for the
benefit of the Beneficiary certifications as to the timely and accurate
calculation of the present value of Net Cash Flow Profits and Net Sales Profits
due to the Beneficiary as Additional Interest, which certifications shall
constitute representations which shall survive the reconveyance and release of
any instrument securing this Agreement and repayment of the Loan and the
obligations under the Loan Documents.
(d) Net Sales Profits Settlement. Within sixty (60) days after the
sale, transfer, conveyance or refinance of the Property, the Trustor shall,
without expense to the holder hereof, deliver to such holder, a statement of the
actual Net Cost Flow prepared and certified by an independent public accountant
and shall be prepared in accordance with generally accepted accounting
principles. If the Additional Interest due the holder hereof shall be greater
than that previously paid to the holder, the statement shall be accompanied by
payment to the holder of the difference. If the Additional Interest due the
37
<PAGE>
holder hereof shall be less than that previously paid to the holder, the holder
shall pay to the Trustor within thirty (30) days after receipt of such statement
the difference.
8. Relationship to Beneficiary and Trustor as Creditors and Debtors
Only. Beneficiary and Trustor intend that the relationship between them shall be
solely that of creditor and debtor. Nothing contained in this Agreement or in
any other document or instrument made in connection with the Loan, including
without limitation Beneficiary's right to receive Contingent Profits Interest
shall be deemed or construed to create a partnership, tenancy-in-common, joint
tenancy, joint venture or co-ownership by or between Beneficiary and Trustor.
Beneficiary shall not be in any way responsible or liable for the debts, losses,
obligations or duties of Trustor with respect to the Property or otherwise. All
obligations to pay real property or other taxes, assessments, insurance
premiums, and all other fees and charges arising from the ownership, operation
or occupancy of the Property and to perform all Leases and other agreements and
contracts relating to the Property shall be the sole responsibility of Trustor.
Trustor, at all times consistent with the terms and provisions of this Agreement
and the other documents and instruments evidencing, securing or otherwise
relating to the Loan, shall be free to determine and follow its own policies and
practices in the conduct of its business on the Property.
9. Covenant Survival. The covenants and obligations of Trustor pursuant
to this Deed of Trust, including without limitation, this Article VI, shall
continue for a period of eleven (11) years after payment in full of the Note.
IN WITNESS WHEREOF, The undersigned has caused this instrument to be
duly executed as of the day and year first above written.
LOST DUTCHMAN PARKS, LLC,
an Arizona limited liability company
By: /s/Norman Andrus
Name: Norman Andrus
Title: Manager
38
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30th day of
July, 1997, by Norman Andrus, as Manager of LOST DUTCHMAN PARKS, LLC, an Arizona
limited liability company, on behalf of __________ said entity.
/s/Christine J. Hughes
My Commission Expires: Notary Public
39
469073\10169.0001-07-23-97
ASSUMPTION AGREEMENT AND NOTE MODIFICATION
This ASSUMPTION AGREEMENT AND NOTE MODIFICATION (the
"Agreement") dated as of July 30, 1997 between LOST DUTCHMAN PARKS, LLC, an
Arizona limited liability company, having its principal place of business at
4614 S. Kachina Drive, Tempe, Arizona 85282 ("Borrower"), and ASSET INVESTORS
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, with an address at
1873 S. Bellair Street, 17th Floor, Denver, Colorado 80222 ("Lender").
W I T N E S S E T H:
THAT, WHEREAS, NORMAN ANDRUS ("Andrus") was the original maker
of that certain Promissory Note (the "Note") dated April 15, 1994, in the
original principal sum of FIVE MILLION FIVE HUNDRED THOUSAND AND NO/100THS
DOLLARS ($5,500,000.00) (the "Indebtedness") made to the order of EASTRICH
MULTIPLE INVESTOR FUND, L.P., a Delaware limited partnership ("Original Payee");
WHEREAS, Original Payee was the original holder of the
interest of beneficiary in that certain Deed of Trust, Assignment of Rents,
Security Agreement, Fixture Filing and Financing Statement dated April 15, 1994,
recorded on January 31, 1995, as Document No. 95-0055429, in the records of
Maricopa County, Arizona (the "Deed of Trust") securing the Note and
encumbering, among other things, that certain real property described in the
Deed of Trust (the "Real Property"), originally owned by Andrus;
WHEREAS, by instrument recorded on August 20, 1996, as
Document No. 96-0585339, in the records of Maricopa County, Arizona, Original
Payee transferred and assigned its rights in the Note and Deed of Trust to STATE
STREET BANK AND TRUST COMPANY, AS TRUSTEE FOR THE BENEFIT OF THE HOLDERS OF CS
FIRST BOSTON MORTGAGE SECURITIES CORP. COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES SERIES 1995-AEW1, serviced by MIDLAND LOAN SERVICES, L.P.
(collectively, "Successor Payee");
WHEREAS, by instrument recorded concurrently herewith in the
records of Maricopa County, Arizona, Successor Payee transferred and assigned
its rights in the Note and Deed of Trust to Lender;
WHEREAS, by instrument recorded concurrently herewith in the
records of Maricopa County, Arizona, Andrus transferred the Real Property to
Borrower; and
WHEREAS, Borrower is willing to assume the obligations
("Obligations") of Andrus under the Note, the Deed of Trust and the other
documents evidencing, securing or otherwise pertaining to the Note (the Note,
Deed of Trust and all such other documents being referred to collectively as the
"Documents"), and Lender is willing to accept Borrower as the principal obligor
under the Documents upon modification of the Note and otherwise on the terms set
forth herein.
<PAGE>
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars, the
mutual premises herein contained and other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, Borrower and
Lender agree as follows:
1. Defined Terms. Except as otherwise defined herein or unless the
context otherwise requires, capitalized terms used in this Agreement shall have
the meaning given to them in the Deed of Trust.
2. Representations and Warranties. Borrower hereby represents and
warrants that it has received and is fully familiar with the terms and
conditions of the Documents; and, except to the extent any of such
representations and warranties may be qualified herein or in any other document
executed by Borrower in connection with this Agreement, makes to Lender with
respect to itself as of the date hereof all the representations and warranties
made by Andrus in the Documents as if all the references to Andrus under the
Documents were references to Borrower.
3. Assumption. Borrower hereby assumes and agrees to pay and perform
the Obligations, including without limitation, the Obligations under the Note
and Deed of Trust, and to be bound by all the terms and conditions of the
Documents as if the Documents had originally been executed by Borrower. Each of
the Documents shall remain in full force and effect; and all of the security for
the payment and performance of the Obligations shall remain as security
therefor. Nothing contained herein is intended to or shall be construed to
release, affect the priority of, or otherwise impair any of the security for the
payment and performance of the Obligations. Borrower hereby ratifies and grants
the Lender the liens and security interests set forth in the Documents.
4. Modification of Note. The Note shall be modified to provide that it
shall bear interest at the rate of ten percent (10%) per annum, payable interest
only monthly until maturity. This modification to the Note shall be deemed to
form a part of the Note and is hereby incorporated into the Note to become a
part thereof and shall be deemed to supplement and amend the terms and
conditions of the Note. This modification to the Note is a revision only and not
a novation, and, except as modified above, all other terms and conditions of the
Note shall remain in full force and effect.
5. Release of Lender. Borrower hereby releases Lender and its partners,
and its and their partners, affiliates, directors, officers, employees and
agents from any and all claims, demands, liabilities and causes in action it may
have which may in any manner be related to the Indebtedness on account of any
action or inaction of any such party being released occurring prior to the
execution hereof.
2
<PAGE>
6. Title Insurance. Borrower shall deliver to Lender a lender's ALTA
policy of title insurance ("Title Policy") from Chicago Title Insurance Company
("Title Company") insuring that the Deed of Trust, as assumed, is in first lien
priority and insuring that Lender is the beneficiary under the Deed of Trust,
subject only to those exceptions shown in Schedule "B" of that certain title
commitment issued by Chicago Title Insurance Company for Order No. 9706711,
dated July 2, 1997.
7. Further Performance. Borrower shall execute and deliver to Lender
such further instruments and do such things as are necessary or desirable, in
the reasonable judgment of Lender, to effect the intent of this Agreement and to
secure to Lender the benefit of all rights and remedies conferred upon Lender by
the terms of this Agreement.
8. Contingencies. This Agreement shall not be binding upon Lender
unless and until the following condition have been satisfied:
(a) Borrower has delivered to Lender the following documents
and other items, all of which shall be properly completed and
executed and shall otherwise by in form and substance
satisfactory to Lender in its reasonable discretion:
(i) such items as Lender may reasonably request.
(b) Title Company is irrevocably committed to issue to Lender
the Title Policy.
Waiver by Lender of any of the foregoing as a condition to the effectiveness of
this Agreement shall not relieve Borrower of the obligation to satisfy such
condition as promptly as possible thereafter.
9. Governing Law. Borrower and Lender hereby agree that this Agreement
shall be interpreted, construed and enforced according to the laws of the State
of Arizona.
10. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
representatives, successors and assigns.
11. Amendments in Writing. This Agreement, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement under seal as of the day and year first above written.
BORROWER:
LOST DUTCHMAN PARKS, LLC,
an Arizona limited liability company
By: /s/Norman Andrus
Norman Andrus
Its: Manager
LENDER:
ASSET INVESTORS OPERATING PARTNERSHIP, L.P,
a Delaware limited partnership
By: /s/Kevin J. Nystrom
Name: Kevin J. Nystrom
Its: Senior Vice President and Chief Financial
Officer of Asset Investors Corporation,
the general partner
4
<PAGE>
STATE OF ARIZONA
)
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30
day of July, 1997, by LOST DUTCHMAN PARKS, LLC, an Arizona limited liability
company, by NORMAN ANDRUS, its Manager, on behalf of the limited liability
company.
/s/Christine J. Hughes
Notary Public
My Commission Expires:
- ------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this _____
day of July, 1997, by ASSET INVESTORS OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership, by Kevin Nystrom, its ___________________, on behalf of the
limited partnership.
/s/Brenda Haenel
Notary Public
My Commission Expires:
May 21, 1998
469119\10169.0001
5
COMMUNITY ACQUISITION AND DEVELOPMENT CORPORATION
2637 McCormick Drive
Clearwater, FL 33759
(813) 726-8868
Fax: (813) 791-7920
July 10, 1997
Andrus Development Corp., Inc.
and Norman Andrus
11100 University Avenue
Apache Junction, AZ 85220
Re: Revised Commitment Letter for: Sun Valley, Apache Acres, Blue
Star and Lost Dutchman Mobile Home Parks and related outlots
(the "Project") as more fully described in Exhibit "A"
attached hereto
Dear Mr. Andrus:
This letter will confirm that Asset Investors Operating Partnership,
L.P., a Delaware limited partnership (the "Lender") has approved your request to
revise the commitment letter dated June 4, 1997 (the "Commitment Letter") to
increase your Loan request to Ten Million Dollars ($10,000,000.00), subject to
the following terms and conditions:
1. Loan Amount: $10,000,000.00.
2. Borrower. Andrus Development Corp., Inc., and Norman Andrus,
individually, shall convey their interest in the Project to Lost Dutchman, LLC,
an Arizona limited liability company (the "LLC"). The structure of the
transaction will be as follows:
A. The LLC shall be the borrower (the "Borrower"), in which
Andrus Development Corp., Inc., and Norman Andrus shall be the members and
Community Acquisition Joint Venture shall be a co-managing member. Andrus
Development Corp., Inc., and Norman Andrus, as their interests may appear shall
own one hundred percent (100%) of the equity interest in the Borrower.
B. The Loan amount shall be advanced by the Lender in
accordance with the loan agreement to be prepared by Lender's counsel.
C. The Lender shall acquire the existing first mortgage held
by David W. Kreutzberg, Trustee for the benefit of Eastrich Multiple Investors
Fund, L.P., a Delaware limited partnership, dated April 15, 1994, recorded
Page 1
<PAGE>
January 31, 1995 (the "First Mortgage"). Said First Mortgage being assigned to
State Street Bank and Trust Company, as Trustee for the benefit of CS First
Boston Mortgage Securities Corp., serviced by Midland Loan Services, L.P.
("Midland") for a sum not to exceed Five Million Five Hundred Thousand Dollars
($5,500,000.00). In the event the payoff to Midland is less than Five Million
Five Hundred Thousand Dollars ($5,500,000.00), the Second Note may be increased
accordingly upon the Lender approving the revised Use of Proceeds. The Borrower,
Lender and Midland shall enter into a loan purchase agreement under terms
satisfactory to Borrower and Lender on or before July 28, 1997, with a closing
date on or before July 30, 1997. Lender shall have no liability in the event
Midland fails to enter into said loan purchase agreement or fails to close under
the terms and conditions set forth therein.
D. The Loan shall be further evidenced by a note secured by a
second mortgage (the "Second Note" and "Second Mortgage"), which amount shall be
advanced by the Lender in the sum of Four Million Five Hundred Thousand Dollars
($4,500,000.00), and shall have a maturity date (the "Maturity Date")
coterminous with the First Mortgage. The Second Note shall bear interest at the
rate of fifteen percent (15%) per annum, having a pay rate of nine percent (9%)
per annum, which shall be due and payable monthly for the first year and will
increase one percent (1%) per year for a maximum of twelve percent (12%) per
annum (the "Pay Rate").
E. The difference between the Pay Rate and the Interest Rate
will be added to the amount of the Second Note and shall bear interest at the
Pay Rate.
F. The First Mortgage shall be modified at closing so that the
note secured by the First Mortgage shall bear interest only at the rate of ten
percent (10%) per annum, payable monthly until maturity and shall be further
modified to include a first lien on Parcel 7 as set forth in Exhibit "A". It is
acknowledged that a portion of Parcel 7 shall be utilized in the redevelopment
of Lost Dutchman and Sun Valley Mobile Home Parks and the balance shall remain
commercial. The Borrower shall have the right to release the commercial portion
of Parcel 7 upon the payment of a release price equal to one hundred percent
(100%) of the fair market value of said parcel at the time of the release as
established by an MAI appraisal acceptable to the Lender.
G. As additional security for the Loan, Andrus Development
Corp., Inc., and Norman Andrus shall grant a security interest in favor of
Lender in their interests in the Borrower and Andrus Development Corp., Inc., as
to the Commercial Outlots.
H. The Second Mortgage shall provide that the Lender shall
receive as additional interest, from available cash flow, a sum equal to three
percent (3%) of the monthly gross revenues prior to the maturity date of the
First Mortgage and upon the refinancing of the First Mortgage and the Second
Mortgage the Lender shall receive thirteen percent (13%) of the gross revenues
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from the Project (the "Additional Interest"). In the event the available cash
flow is not sufficient to make timely payments of the Additional Interest, then
said interest shall accrue and be payable as cash flow is available to satisfy
said Additional Interest on a cumulative basis. In addition to the foregoing,
the Second Mortgage shall provide for a fifty percent (50%) participation in the
net proceeds from the sale or refinancing of the Project. The sums due Lender
hereunder shall survive the satisfaction of the principal indebtedness upon the
sale or refinancing of the Project for a period of eleven (11) years, subject to
the "Put/call" during which time the Project may not be sold without the written
consent of the Lender.
I. The LLC documentation shall provide for a Put/call at any
time during the term of the agreement, however, the Lender shall be obligated to
purchase the interest of Andrus Development Corp., Inc., and Norman Andrus at
fair market value based on an MAI appraisal, at the earlier of the death of
Norman Andrus or ten (10) years and said parties shall have the obligation to
sell under the Put/call. Payment to Borrower will be in equal monthly
installments at prevailing long term rates for a period not to exceed thirty
(30) years. The Lender will have the option to pay for this obligation in full
by funding one or more annuities with A+ rated insurance companies, such
companies to be approved by Borrower or its beneficiaries. The Put/call shall
survive the satisfaction of the indebtedness.
J. Norman Andrus and/or Andrus Development Corp., Inc., upon
dissolution, may contribute all or part of his interests in the Project into a
family trust.
K. In order to ensure that the future development or operation
of the abutting properties (the "Outlots") owned by Andrus Development Corp.,
Inc., do not adversely impact the Project, Andrus Development Corp., Inc., shall
execute deed restrictions to be mutually agreed upon by the parties and
incorporated herein by reference, together with a right of first refusal and
option in favor of Lender, granting Lender the right to acquire Outlots 6A, 6C,
6D, 5A, 5B, 5C, and 5D in the event Borrower defaults under the terms and
conditions of the Loan or any loans on the Outlots. The option price shall be at
fair market value based on an MAI appraisal at the time of the exercise of the
option. The exercise of the right of first refusal shall be based on the terms
and conditions of a bonafide third party contract. Lender acknowledges that
Andrus Development Corp., Inc., intends to convey Lot 6B to the mortgagees
having a current lien in lieu of foreclosure. The deed restrictions and right of
first refusal granted hereunder as to the other Outlots shall be subordinate to
the existing financing encumbering said Outlots, however, shall be superior to
any refinancing which shall be subject to the approval of the Lender. The Lender
further acknowledges that the current second mortgagee on Apache Acres has
agreed to release its lien upon the payment of One Hundred Fifty Thousand
Dollars ($150,000.00), and the receipt of an unsecured note for Two Hundred
Thousand Dollars ($200,000.00). It is a requirement of this Commitment that the
Borrower be neither a maker nor a guarantor on that unsecured note. The Lender
further acknowledges that the First National Bank of Arizona or a private
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investor may take a mortgage position on the commercial lots (excluding Parcel
7) has agreed to take a mortgage position on the commercial Outlots in order to
satisfy Item 12 of Schedule B-1 of the Chicago Title Insurance Company
Commitment for Title Insurance No. 995181-56, and that the Borrower shall use
its best efforts to have said creditor join in the execution of the deed
restriction and right of first refusal.
3. Advances: Ten Million Dollars ($10,000,000.00) in accordance with
the terms and conditions of this Agreement letter (the "Agreement") and the
Transaction Documents described in this Agreement, but in no event more than 85%
of the market value as appraised in accordance with the hereinbelow appraisal
provision (the "Loan Advances"). At the closing of this transaction, the Lender
shall fund Eight Hundred Fifty Thousand Dollars ($850,000.00) with respect to
items (e) and (f) of paragraph 4 below, which funds shall be deposited in the
construction account described in paragraph 20 below.
4. Use of Proceeds: See Exhibit "C" attached hereto and incorporated
herein by reference. Provided the Borrower is not in default under the Loan
Agreement, the Use of Proceeds may be reallocated upon evidence from the
Borrower satisfactory to Lender that the sums remaining in each category is
sufficient to satisfy all of the costs relating to that category.
5. Appraisals: Lender acknowledges that Borrower, at its expense, has
obtained an appraisal in accordance with the Lender's appraisal instructions
prepared by Burke Hansen, Inc., dated June 26, 1997.
6. Documentation. Arizona counsel shall be retained at the expense of
the Borrower to prepare the loan documentation and review the operating
documents of the Borrower and related documents.
7. Transactional Costs. Transactional Costs of this transaction shall
be funded by the Borrower in accordance with the use of proceeds.
8. Conditions Precedent. The obligation of the Lender to fund in
accordance with this Agreement is conditioned upon its receipt and approval of
all items referred to on the attached Due Diligence Checklist (Exhibit "B"),
which shall be obtained at your expense.
9. Hazardous Wastes: Lender acknowledges that Borrower, at its expense,
has obtained a Phase I Environmental Site Assessment in accordance with the
Lender's instructions prepared by EnviroAssessments, Inc., dated June 25, 1997.
10. Material Change: Lender shall have no obligation to fund the Loan
if there is any material adverse change in the financial position of Borrower
from that reflected in the financial statements, tax returns and other data to
be submitted to the Lender, or if any information previously submitted to the
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Lender proves to be false. The Lender shall have no liability to any party
whatsoever for such failure to fund.
11. Assignability of Rights Under this Agreement: This Agreement is
issued in favor of Borrower and is not assignable by Borrower or transferrable
by operation of law or otherwise, except with the prior written consent of the
Lender, however, Lender acknowledges and consents to Norman Andrus assigning his
interest in the Project to a trust which would own the membership interest in
the LLC.
12. Terms To Survive Closing: The terms and conditions of this
Agreement shall be construed where possible to apply to the continuing
relationship of Borrower and the Lender, and to supplement the various documents
to be executed at closing, and to that extent the terms and conditions of this
Agreement shall survive the closing.
13. Indemnity: In the event Lender is named in any legal or equitable
action arising out of, connected with, or in any way relating to this Agreement,
Borrower shall indemnify Lender for, and hold Lender fully harmless from any and
all damages, losses, liabilities, costs, and other expenses, including
reasonable attorneys' fees, resulting from or arising out of such action.
14. Effective Date: This Agreement shall not be effective unless and
until Lender has received one copy of this Agreement executed by Borrower and
all of your affiliates owning an interest in the Project.
15. Lender's Counsel: Lender's attorneys for this transaction shall be
the firm of Joseph W. Gaynor, P.A. The fee charged by this law firm at closing
is for all services directly related to closing this transaction and shall be
paid by the Borrower. Additional legal fees may from time to time be incurred by
the Borrower for post-closing services rendered relating to this transaction. In
addition to Joseph W. Gaynor, P.A., local counsel shall be JAMES CONNOR, ESQ.,
Gallagher & Kennedy, 2600 N. Central Avenue, Phoenix, AZ 85004-3020, and shall
be paid by the Borrower.
16. Termination of Agreement: The obligations of Lender under the terms
of this Agreement shall terminate without notice upon the occurrence of any of
the following:
a. the filing by or against Borrower owning an interest in the
Property of a petition in bankruptcy or insolvency or for reorganization under
any chapter of the Federal Bankruptcy Code;
b. the appointment of a receiver or trustee, or the making by
any such party of any assignment for the benefit of creditors;
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c. commencement under any other law, state or federal,
bankruptcy or insolvency proceedings for relief from, or the composition,
extension, arrangement or adjustment of, your obligations prior to the closing
of this transaction;
d. the issuance of a writ of attachment against any of the
Property;
e. the taking of possession of or the assumption of control of
all or a substantial part of the Project by any government or governmental
agency ;
f. a material adverse change to the business or financial
condition of the Project; or
g. Your failure to perform or comply with any term or
condition as provided for herein and the transactional documents.
17. Financial Information: The Borrower shall provide each Member with:
a. Monthly financial statements certified by you; or upon any
uncured event of default, financial compilation reports prepared by an
independent certified public accountant selected by Borrower and acceptable to
the Lender;
b. Annual financial compilation reports or upon any uncured
event of default, audited financial statements within ninety (90) days after the
end of its fiscal year, prepared by an independent certified public accountant
selected by Borrower and acceptable to Lender;
c. Such other information as Lender may from time to time
reasonably request, including, but not limited to, projected monthly cash flow
and revised operating budget.
18. Tax Status: Borrower shall submit an affidavit of tax status to the
effect that Borrower or it have duly filed all federal, state and local tax
returns and reports of all other governmental agencies having jurisdiction; and
that except as otherwise disclosed in the affidavit, Borrower shall certify that
all such taxes shown on such returns or reports have been paid to the extent
that such taxes have become due, and that none of such federal, state and local
tax returns and reports were filed on a consolidated basis.
19. Environmental Laws: Your entity shall be responsible for compliance
with all environmental regulations and/or requirements of local, state or
federal government. Evidence of said compliance shall be submitted to Lender
upon request.
20. Accounts: A construction account, operating account and lockbox
account for this Project shall be maintained at a financial institution selected
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by the Borrower; and all proceeds from this transaction shall be deposited to
the accounts or other accounts approved by the Lender; and all liabilities will
be paid from said accounts. No funds applicable to this Project shall be
commingled with any other funds. The Lender shall control the disbursement of
funds, form the construction account and lock box account.
21. Authorization to Disburse to Builder: The Borrower shall execute an
authorization to disburse to any contractor during the course of construction so
long as the Lender has approved all construction draws and all local building
regulations and requirements are satisfied.
22. Bonds: If required by the Lender, the Borrower shall provide, prior
to construction, a performance and payment bond written by a compensated surety
acceptable to the Lender for certain phases of the construction project.
23. Building Permit: The Borrower shall, prior to any construction,
provide to the Lender a certified true and correct copy of the building permit
or permits, properly issued without variance by the appropriate governmental
agency, authorizing the construction/development which is contemplated by this
transaction. In the event a permit is issued under a variance, the Borrower must
obtain the prior written approval of the Participant.
24. Change Orders: All change orders in excess of $5,000, either
individually or cumulatively, and those which, at the discretion of the Lender,
materially change the plans and/or specifications previously submitted and
approved shall be approved by the Lender.
25. Construction/Development Commencement: Construction/ Development
shall be commenced within a period of thirty (30) days from the date this
transaction is closed and shall continue without interruption until completion.
26. Disbursement Procedures: The Loan funds shall be disbursed in
accordance with the cost breakdown approved by Lender subject to and in
accordance with the following provisions:
a. Prior to closing, the final cost breakdown schedule must
show the actual costs required for the completion of the Project as contemplated
by this Agreement supported by evidence as may be reasonably required by Lender.
b. Loan proceeds shall be disbursed by Lender to the Borrower,
any contractor and/or sub-contractors or materialmen at the option of Lender, or
to the title insurer equal to ninety percent (90%) of the costs of material and
labor in place and not stored, it being the intention that all disbursements be
subject to a ten percent (10%) holdback, which ten percent (10%) holdback will
be disbursed upon completion of the Project as defined herein.
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c. As a condition to each disbursement, your entity shall:
i. Supply a certificate from the engineer or architect
appointed by Lender certifying that the improvements have been completed to date
in accordance with plans and specifications as approved by Lender to the degree
of completion as represented by the request for disbursement of loan proceeds,
which certificate shall be based upon a visual monthly inspection by said person
making the certificate. Upon receipt of the certification, Lender shall employ
its Representative Inspector to examine the Project to determine that the stage
of completion is as represented. Borrower agrees to pay Lender for the services
of such inspector for disbursing such loan proceeds.
ii. Supply partial waivers of lien and, upon request for
final payment, final waivers of lien, duly executed by subcontractors and
suppliers who have performed work, which waiver shall be attached to the
certificate, described as aforesaid with respect to the preceding month's
disbursement.
iii. Supply affidavits of the owner and general
contractor confirming that all subcontractors, laborers and materialmen who have
furnished services and/or materials have been paid as set forth in the previous
draw request.
iv. Supply a re-certification or update of title by the
title insurer updating title to within seven (7) days of the date of such
disbursement.
d. The Borrower shall not make more than one request for an
advance per calendar month. No request for disbursement shall be funded less
than five (5) working days after submission by Borrower of all of the above
documentation.
e. As a condition precedent to the disbursement of the ten
percent (10%) holdback, the following requirements must be met:
i. The contractor, the engineer or architect and
Lender's Representative Inspector must certify that the phase of the Project is
fully completed in accordance with the plans and specifications approved by
Lender and in accordance with all rules and regulations of governmental
authorities having jurisdiction over the Property. If changes have been made in
the plans and specifications which materially reduce the cost of construction or
utility value of the improvements, Lender reserves the right not to fund any
retainage.
ii. Lender's Representative Inspector must examine that
phase of the Project and approve same as having been completed in accordance
with the plans and specifications approved by Lender.
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iii. Borrower shall provide not less than four (4)
photographs of the improvements clearly showing the improvements from all main
directions so as to reveal the entire Project as completed when viewed as a
composite.
iv. Lender must have received and approved an as-built
survey locating all improvements in accordance with the requirements set forth
in the Closing Checklist and that there are no encroachments or violations of
building set-back lines, easements or restrictive covenants.
v. Receipt by Lender of a final mechanic's lien
affidavit and contractor in a form as required by Lender and the title insurer
that all persons who have supplied labor and material with respect to the
Project have been paid in full, and having attached thereto recordable
individual final releases of lien from all such persons, firms or corporations.
vi. Supply a re-certification or update of title by the
title insurer updating title to within seven (7) days of the date of such
disbursement.
vii. Satisfactory evidence that all necessary
certificates required by any agency, authority or board, governmental or
otherwise, have been obtained.
27. Fees and Commissions: No fees, commissions or other payments shall
be paid to Borrower without the written approval of Lender.
28. General Contractor's Agreement: Lender shall have the right of
prior approval of any contractor's agreement as to form and content. Borrower
shall submit said contract to the Lender for review prior to the execution
thereof prior to execution by the Borrower and Lender shall give Borrower prompt
notice of such approval or disapproval. The contractor shall be an independent
contractor, however, Norman Andrus may act as the General Contractor if
permitted by applicable law provided Lender has the prior written approval of
any subcontractor agreements and materialmen agreements and the Borrower is not
otherwise in default under the terms and conditions of the Loan Agreement.
Borrower shall furnish an executed copy of said agreement to Lender prior to
funding any construction proceeds.
29. Loan Proceeds Allocation: Borrower shall submit with the plans and
specifications an allocation for all Loan Advances as a breakdown for each
classification; that cost breakdown and allocation must be in a form
satisfactory to Lender and the disbursement procedures hereinafter specified
shall be paid in accordance with said cost breakdown. The final allocation is
subject to the sole discretion of the Lender based on its final analysis of the
plans, specifications, and other direct and indirect costs.
30. Mechanic's Lien Law: Lender's ability to disburse shall be limited
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to any notices to owners, liens or any provisions of the Mechanic's Lien Law.
31. Plans and Specifications: All improvements on the Property shall be
completed in accordance with the plans and specifications (and change orders
affecting the same), approved in writing by the parties. Two copies of the final
plans and specifications sealed by the architect and change orders shall be
delivered to Lender prior to funding any other construction proceeds. All
construction shall be of good quality, commenced as soon as possible, and
diligently prosecuted to completion. Inspections may be made by Lender or an
independent engineer retained by Lender and compensated by the Borrower at any
and all times during construction and after completion thereof, and satisfactory
certificates of such an engineer shall be submitted to Lender at least
bi-monthly. The plans and specifications are to be previously approved and
stamped by all governmental agencies having jurisdiction over the Property and
Project. Lender's obligation concerning any Loan Advance specifically
conditioned upon Lender's engineer or Representative Inspector reviewing the
plans and specifications, together with all change orders, and the Schedule of
Values and soil test to determine that the Project can be completed for the
estimated cost and is structurally sound.
32. Other Developmental Documents: Counsel for Lender must approve all
other development documents required for development of the Project, including,
but not limited to, declarations of covenants, conditions and restrictions,
master easement agreements, easements, and any other agreements which affect the
development of the Property. Borrower agrees to pay all costs incurred by Lender
in the review of these development documents. After Lender's approval of these
documents, no changes may be made thereto without the prior written approval of
Lender. The Borrower agrees to pay all costs incurred by Lender in the review of
these developmental documents. After Lender's approval of these documents, no
changes made be made thereto without the prior written approval of the Lender.
33. Representative Inspector: An inspecting architect or engineer shall
be retained by Lender for the benefit of the Borrower for purposes of ensuring
that the work has been completed in substantial compliance with the plans and
specifications for the Project. Such inspecting architect or engineer shall have
access to the Property and records at any time during construction of the
Project and after completion thereof. Satisfactory certificates of such
inspecting architect or engineer shall be submitted to Lender at least
bi-monthly. Disbursement of the loan proceeds is subject to satisfactory
periodic inspections and approval thereof by the Lender. Such inspections shall
be solely and exclusively for the information and benefit of the Lender, and
such inspecting architect or engineer shall be deemed an agent of Borrower.
Lender shall not be deemed a participant or joint venturer in the construction
of the Project for any purpose whatsoever. Borrower agrees to pay Lender for the
services of such inspecting architect or engineer. In the event of a
disagreement as to the amount of work completed, or the loan proceeds to be
disbursed, such determination shall be made in accordance with the Lender's
estimate. The cost of reinspections occasioned for any reason whatsoever shall
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be paid by the Borrower.
34. Marketing: This Agreement is subject to Lender's approval of any
marketing firm engaged by Borrower or to be engaged for the Project and the
approval of such firm's marketing agreement with Borrower. Borrower shall not
change or substitute marketing firms or modify the terms of the approved
marketing agreement without the prior written consent of Lender. Lender's
continuing obligation to fund pursuant to this Agreement shall terminate upon
the change or substitution of the marketing firm or the modification of the
marketing agreement absent such consent.
35. Management: The Project shall be managed by AIC Community
Management Partnership, d/b/a Brandywine Communities, for a management fee of
six percent (6%) of the gross revenues derived from the Project, however, so
long as Borrower are not in default under the terms of this Agreement or the
Operating Agreement of the Borrower, Norman Andrus d/b/a Andrus Property
Management will be in control of the day-to-day operation of the Project and
paid a sub-management fee not to exceed four percent (4%) of the gross revenues
derived from the Project. In the event of an uncured default, Borrower agrees
that AIC Community Management, d/b/a Brandywine Communities shall take control.
The net two percent (2%) management fee due Brandywine Communities shall accrue
until the Project generates available cash flow to pay that liability.
36. Lease Approval: All leases (including extensions, renewals or
modifications) shall have prior written approval of Lender and shall be valid
and enforceable. For the purpose of this requirement, a lease shall be deemed
"valid" in the case of tenants where (i) the tenant is creditworthy; (ii) the
tenant is in occupancy of its lot; (iii) the tenant has paid its security
deposit; and (iv) tenant shall have entered into a subordination and attornment
agreement with Lender, if required by Lender. None of the leases shall contain
an option to purchase. Lender may require Borrower to use a standard form of
lease for the Project approved by Lender.
In addition to the foregoing, Borrower shall furnish to Lender
monthly, a rent roll for the Property, certified by Borrower to be true and
correct, in form and substance as may be required by Lender in it sole
discretion.
37. Easements and Utilities Easements: Borrower shall grant or reserve
or acquire no easement to or from any person or entity on, over, under or
appurtenant to the Property for ingress and egress, or other access, either
permanent or temporary, for vehicular traffic, pedestrian traffic, installation,
construction, utilities, telephone or any other purpose or use absent the prior
written consent of Lender to such easement and the approval of Lender of the
form and substance of the documentation to be used for said creation of same. No
general or blanket easement for utilities, telephone or any other purpose will
be acceptable and Lender must be provided with a certified survey meeting the
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requirements set forth hereinabove locating the easement as proposed.
38. Site Inspection: Prior to any funding hereunder, Lender or Lender's
agent shall have the right of inspection and approval of the site as to adequacy
of land and suitability for the proposed Project.
39. Fees: The Lender acknowledges that Borrower have agreed to pay a
mortgage broker's commission in the amount of One Hundred Fifty Thousand Dollars
($150,000.00) to JDC & Associates, under a separate written letter agreement
(the "Broker"). You, by the acceptance of this Agreement, hereby warrant there
are no other brokers involved in this transaction and that Borrower further
agree to indemnify and hold Lender harmless from any and all claims for a
brokerage fee as a result of this transaction. Borrower further acknowledges
that the Lender shall receive a loan structuring fee of one percent (1%) of the
Loan Amount at the time of closing this transaction. In addition to the loan
structuring fee, the Borrower shall pay the Community Acquisition Joint Venture
Fifteen Thousand Dollars ($15,000.00) per year asset management fee and
reimbursement of any reasonable out-of-pocket costs regarding travel and lodging
pertaining to any Project inspections or Membership meetings. Lender agrees to
accrue the asset management fee may accrue during the construction period of the
Project or until there is sufficient available cash flow to service the Project
in accordance with the pre-approved budget. Lender also acknowledges that
Borrower has entered into an agreement with the Broker to pay the Broker a one
percent (1%) broker's commission, based on the principal balance due under the
First Mortgage at the time of any refinancing if said Broker is the procuring
cause of said substitute First Mortgage. In the event Lender, or any of its
affiliates advances the funds to satisfy the indebtedness due under the First
Mortgage and/or refinance the Second Mortgage, no brokerage fee shall be due
said Broker. Lender further acknowledges that the Borrower has agreed to pay the
Broker an additional fee equal to twenty percent (20%) of any discount of
existing encumbrances affecting the Project in accordance with the Use of
Proceeds.
40. Termination of Agreement: If all conditions precedent prior to
funding of this Agreement have not been satisfactorily completed on or before
July 30, 1997, either party shall have the right to terminate this Agreement
without further notice or obligation on its part, however, Borrower shall be
liable for all third party costs pertaining to the due diligence contemplated by
this Agreement, provided Borrower timely furnish the Lender all of the due
diligence contemplated by this Agreement.
41. Conditions Precedent. Borrower acknowledges that a condition
precedent to the funding of this Loan by the Lender is that Borrower obtain
sufficient discounts of the existing indebtedness encumbering Apache Acres and
Blue Star Mobile Home Parks, in accordance with the Use of Proceeds. In the
event that Borrower is unable to obtain those discounts or the sale of the First
Mortgage to Lender, the Lender shall have the right to cancel this Commitment
and be released of any further responsibility hereunder. In the event of a
cancellation of this Commitment for any reason whatsoever other than a default
by Lender, Borrower shall be responsible for the cost of all due diligence,
including but not limited to, any and all fees and expenses due James Connor,
Esq., EnviroAssessments, Inc., Lawyers Title Insurance Corporation, Ernst &
Young, LLP, or any other third party service provider engaged by the Lender for
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the benefit of the Borrower.
42. Effective Date. The terms and conditions of this Commitment Letter
supersede and are in replacement of the terms and conditions set forth in the
Commitment Letter dated June 4, 1997, and dshall be effective as of July 10,
1997.
ASSET INVESTORS OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
BY: COMMUNITY ACQUISITION
AND DEVELOPMENT
CORPORATION, a Delaware
corporation, Authorized Representative
BY:___________________________
Joseph W. Gaynor, President
Accepted and acknowledged this 23 day
of July, 1997.
ANDRUS DEVELOPMENT CORP., INC.
By: /s/ Norman Andrus
Norman Andrus
/s/ Norman Andrus
Norman Andrus, Individually
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Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-42605) of Asset Investors Corporation of our report dated July 3,
1997, with respect to the Statement of Excess of Revenues over Specific
Operating Expenses of The Andrus Manufactured Home Communities for the year
ended December 31, 1996, included in the Current Report (Form 8-K) dated July
30, 1997.
Phoenix, Arizona
August 11, 1997 ERNST & YOUNG LLP
