SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9360
ASSET INVESTORS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-1500244
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3410 South Galena Street, Suite 210 80231
Denver, Colorado (Zip Code)
(Address of Principal Executive Offices)
(303) 614-9400
(Registrant's telephone number, including area code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __.
As of May 5, 2000, 5,679,469 shares of common stock were outstanding.
<PAGE>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Financial Statements:
Balance Sheets as of March 31, 2000 (unaudited)
and December 31, 1999........................................... 1
Statements of Income for the three months ended
March 31, 2000 and 1999 (unaudited)............................. 2
Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 (unaudited)............................. 3
Notes to Financial Statements (unaudited)....................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 12
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K................................ 22
(i)
<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
March 31, December 31,
2000 1999
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Real estate, net of accumulated depreciation of $8,123 and $7,248 $ 138,271 $ 108,745
Investments in participating mortgages -- 22,475
Cash and cash equivalents 888 570
Investment in Commercial Assets 19,233 19,486
Inventory 9,559 --
Other assets, net 7,082 7,817
------------ -----------
Total Assets $ 175,033 $ 159,093
============ ===========
LIABILITIES
Secured long-term notes payable $ 58,749 $ 53,994
Secured short-term financing 9,962 2,610
Accounts payable and accrued liabilities 6,565 3,401
------------ -----------
75,276 60,005
------------ -----------
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST IN OPERATING PARTNERSHIP 16,583 15,236
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share, 15,000 shares authorized;
no shares issued or outstanding -- --
Common stock, par value $.01 per share, 35,000 shares authorized;
5,633 and 5,633 shares issued; and 5,603 and 5,603 shares
outstanding, respectively 56 56
Additional paid-in capital 239,381 239,381
Notes receivable on common stock purchases (580) (588)
Dividends in excess of accumulated earnings (155,233) (154,547)
Treasury stock, 30 and 30 shares at cost (450) (450)
------------ -----------
83,174 83,852
------------ -----------
Total Liabilities and Stockholders' Equity $ 175,033 $ 159,093
============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months
Ended March 31,
---------------
2000 1999
---- ----
Rental property operations
<S> <C> <C>
Rental and other property revenues $ 4,469 $ 3,558
Income on participating mortgages and leases 705 778
Property operating expenses (1,709) (1,287)
Depreciation (1,089) (920)
--------- ---------
Income from rental property operations 2,376 2,129
--------- ---------
Sales operations
Home sales revenues 2,283 --
Cost of home sales (1,905) --
Selling and marketing expenses (788) --
Interest expense allocation (106) --
Minority interest in sales operations 139 --
--------- ---------
Loss from sales operations (377) --
--------- ---------
Service operations
Property management income, net 58 54
Commercial Assets management fees 141 89
Amortization of management contracts (516) (689)
--------- ---------
Loss from service operations (317) (546)
--------- ---------
Equity in earnings of Commercial Assets 208 295
General and administrative expenses (437) (338)
Interest and other income 190 53
Interest expense (788) (941)
--------- ---------
Income before minority interest in Operating Partnership 855 652
Minority interest in Operating Partnership (135) (110)
--------- ---------
Net income $ 720 $ 542
========= =========
Basic and diluted earnings per share $ 0.13 $ 0.10
========= =========
Weighted average common shares outstanding 5,572 5,453
Weighted average common shares and common share equivalents outstanding
5,572 5,464
Dividends paid per share $ 0.25 $ 0.25
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months
Ended March 31,
---------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 720 $ 542
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 1,647 1,664
Minority interest in Operating Partnership and sales operations (55) 110
Equity in earnings of Commercial Assets (106) (262)
Income from participating mortgages (600) (377)
Gain on sale of real estate (109) --
Increase in inventory (1,140) --
Increase in other assets (364) (372)
Increase (decrease) in accounts payable and accrued liabilities 861 (261)
------- --------
Net cash provided by operating activities 854 1,044
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate 2,510 --
Purchases of real estate (765) --
Investments in participating mortgages, net -- (1,907)
Capital replacements and improvements (1,259) (55)
Dividends from Commercial Assets 359 359
--------- --------
Net cash provided by (used in) investing activities 845 (1,603)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of Common Stock dividends (1,408) (1,390)
Payment of distributions to minority interest in Operating Partnership (261) (250)
Proceeds from secured long-term notes payable 103 6,225
Principal paydowns on secured long-term notes payable (461) (300)
Proceeds from secured short-term financing 638 --
Principal paydowns on secured short-term financing -- (2,800)
Collections of notes receivable 8 --
Payment of loan costs -- (255)
Proceeds from the issuance of Common Stock, net -- 43
--------- --------
Net cash provided by (used in) financing activities (1,381) 1,273
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 318 714
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 570 1,426
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 888 $ 2,140
========= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. The Company
Asset Investors Corporation ("AIC" and, together with its subsidiaries, the
"Company") is a Delaware corporation that owns and operates manufactured home
communities and has elected to be taxed as a real estate investment trust
("REIT"). Prior to May 25, 1999, AIC was a Maryland corporation. Effective May
25, 1999, AIC's stockholders approved its reincorporation in Delaware. AIC's
common stock, par value $.01 per share ("Common Stock"), is listed on the New
York Stock Exchange under the symbol "AIC." In May 1997, AIC contributed its net
assets to Asset Investors Operating Partnership, L.P. (the "Operating
Partnership") in exchange for the sole general partner interest in the Operating
Partnership and substantially all of the Operating Partnership's initial
capital. AIC owns 84% of the Operating Partnership as of March 31, 2000. The
Company also owns 27% of the common stock of Commercial Assets, Inc.
("Commercial Assets") and substantially all of the common stock of both AIC
Manufactured Housing Corp. ("AICMHC") and Asset Investors Equity, Inc. ("AIE").
Commercial Assets is a publicly-traded REIT (American Stock Exchange, Inc.: CAX)
formed by the Company in August 1993. AICMHC owns interests in manufactured home
community management contracts and AIE manages Commercial Assets.
B. Presentation of Financial Statements
The Condensed Consolidated Financial Statements of the Company presented herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. These financial
statements reflect all adjustments, consisting of only normal recurring
accruals, which, in the opinion of management, are necessary to present fairly
the financial position, results of operations and cash flows of the Company as
of March 31, 2000, for the three month period then ended and for all prior
periods presented. These statements are condensed and do not include all the
information required by generally accepted accounting principles ("GAAP") in a
full set of financial statements. These financial statements should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
Certain reclassifications have been made in the 1999 Condensed Consolidated
Financial Statements to conform to the classifications used in the current year.
Such reclassifications have no material effect on amounts previously reported.
C. Summary of Significant Accounting Policies
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of the
Company, the Operating Partnership and all controlled subsidiaries. The minority
interest in the Operating Partnership represents the OP Units which are
convertible, at the option of the holder. When a holder elects to convert OP
Units, the Company determines whether such OP Units will be converted into cash
or shares of Common Stock. The holders of OP Units receive the same amount per
OP Unit in distributions as the holders of Common Stock at the time of dividend
distributions. As of March 31, 2000, 1,045,000 OP Units were outstanding. All
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<PAGE>
significant intercompany balances and transactions have been eliminated in
consolidation. The Company's investment in Commercial Assets is recorded under
the equity method.
Rental Properties and Depreciation
Rental properties are recorded at cost less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of a property may be impaired, the Company will make an assessment of its
recoverability by estimating the future undiscounted cash flows, excluding
interest charges, of the property. If the carrying amount exceeds the aggregate
future cash flows, the Company would recognize an impairment loss to the extent
the carrying amount exceeds the fair value of the property. As of March 31,
2000, management believes that no impairments exist based on periodic reviews.
No impairment losses were recognized for the three months ended March 31, 2000
and 1999.
Depreciation is computed using the straight line method over an estimated useful
life of 25 years for land improvements and buildings and five years for
furniture and other equipment. Significant renovations and improvements, which
improve or extend the useful life of the asset, are capitalized and depreciated
over the remaining estimated life. In addition, the Company capitalizes direct
and indirect costs (including interest, taxes and other costs) in connection
with the development of additional homesites within its manufactured home
communities. Maintenance, repairs and minor improvements are expensed as
incurred.
Investments in Participating Mortgages
The Company has loans secured by real estate which provide for an interest rate
return plus up to 50% of net profits, cash flows and sales proceeds from the
secured real estate. The Company accounts for these investments as loans when
(a) the Company does not have an interest in the borrower and either (b) the
borrower has a substantial equity investment in the real estate collateral or
(c) the Company has recourse to other substantial tangible assets of the
borrower. As such, the Company records interest income based on the rate
provided for in the loan and records its share of any net profits or gains from
the sale of the underlying real estate when realized. If the above requirements
are not met, then the loan is accounted for as an equity investment in real
estate under the equity method of accounting.
Inventory
Inventories are recorded at the lesser of cost or market. At March 31, 2000,
there was no reserve for inventory.
Amortization
Included in other assets is the cost related to the acquisition of management
contracts, which is being amortized over a period of three years.
Revenue Recognition
The Company derives its income from the rental of homesites. The leases entered
into by residents for the rental of the site are generally for terms not longer
than one year and the rental revenues associated with the leases are recognized
when earned and due from residents. Property management income for services
provided to communities not owned by the Company are also recognized when
earned.
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<PAGE>
Interest on participating mortgages is recorded based upon outstanding balances
and interest rates per the terms of the mortgages. In addition, the Company
evaluates the collectibility of any unpaid interest and provides reserves as
necessary.
Deferred Financing Costs
Fees and costs incurred in obtaining financing are capitalized. Such costs are
amortized over the terms of the related loan agreements and are charged to
interest expense.
Interest Rate Lock Agreements
Interest rate lock agreements related to planned refinancings of identified
variable rate indebtedness are accounted for as anticipatory hedges. Upon the
refinancing of such indebtedness, any gain or loss associated with the
termination of the interest rate lock agreement is deferred and recognized over
the life of the refinanced indebtedness.
Income Taxes
AIC has elected to be taxed as a REIT as defined under the Internal Revenue Code
of 1986, as amended (the "Code"). In order for AIC to qualify as a REIT, at
least 95% of its gross income in any year must be derived from qualifying
sources. The activities of AICMHC and AIE are not qualifying sources.
As a REIT, AIC generally will not be subject to federal income taxes at the
corporate level if it distributes at least 95% of its REIT taxable income to its
stockholders. REITs are also subject to a number of other organizational and
operational requirements. If AIC fails to qualify as a REIT in any taxable year,
its taxable income will be subject to federal income tax at regular corporate
rates (including any applicable alternative minimum tax). Even if AIC qualifies
as a REIT, it may be subject to certain state and local income taxes and to
federal income and excise taxes on its undistributed income.
At March 31, 2000, AIC's net operating loss ("NOL") carryover was approximately
$95,000,000 and its capital loss carryover was approximately $20,000,000. The
NOL carryover may be used to offset all or a portion of AIC's REIT income, and
as a result, to reduce the amount that AIC must distribute to stockholders to
maintain its status as a REIT. The NOL carryover is scheduled to expire between
2007 and 2009, and the capital loss carryover is scheduled to expire in 2000 and
2001.
Earnings Per Share
Basic earnings per share for the three months ended March 31, 2000 and 1999 are
based upon the weighted-average number of shares of Common Stock outstanding
during each such period. Diluted earnings per share reflect the effect of
dilutive, unexercised stock options of 0 and 11,000 shares for the three months
ended March 31, 2000 and 1999, respectively.
Capitalized Interest
Interest is capitalized on development projects during periods of construction
or development. Capitalized interest was $419,000 and $17,000 for the three
months ended March 31, 2000 and 1999, respectively.
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<PAGE>
Treasury Stock
The Company owns 27% of Commercial Assets' common stock. During 1999, Commercial
Assets purchased 114,000 shares of the Company's Common Stock. Consequently, the
Company has an interest in 30,000 shares of its Common Stock and has recorded
this as treasury stock.
Statements of Cash Flows
For purposes of reporting cash flows, cash maintained in bank accounts, money
market funds and highly-liquid investments with an initial maturity of three
months or less are considered to be cash and cash equivalents. The Company made
interest payments of $1,047,000 and $815,000 for the three months ended March
31, 2000 and 1999, respectively.
Non-cash operating, investing and financing activities for the three months
ended March 31, 2000 and 1999 were (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Conversion of OP Units into Common Stock $ -- $ 8,603
Real estate acquired:
By cancellation of participating mortgages 22,591 --
By assumption of notes payable 4,711 --
By assumption of accounts payable and accrued liabilities, net of other
assets received 1,848 --
For issuance of note payable 1,740 --
For issuance of OP Units 496 --
Inventory acquired:
By assumption of secured short-term financing 4,594 --
By cancellation of participating mortgages and notes receivable 1,805 --
By assumption of notes payable 403 --
By assumption of accounts payable and accrued liabilities, net of other
assets received 649 --
By minority interest in subsidiary 1,001 --
Receivables from minority interest in subsidiaries 4 179
Purchase of property management contracts for note payable 380 --
Other assets, net of assumed liabilities, for minority interest in subsidiary 165 --
</TABLE>
D. Proposed Merger with Commercial Assets
The Company and Commercial Assets have agreed to merge, subject to the approval
by both (a) a majority of the Company's outstanding shares and (b) two-thirds of
Commercial Assets' outstanding shares. The Company owns approximately 27% of the
Commercial Assets' outstanding shares and has agreed to vote these shares in
favor of the merger. The Company will issue 0.4075 shares of its common stock
for each outstanding share of the Commercial Assets common stock. Alternatively,
Commercial Assets' stockholders may elect to receive $5.75 per share in cash for
up to 3,549,868 shares of Commercial Assets common stock with any remaining
shares receiving 0.4075 shares of the Company's Common Stock. The officers and
directors of the Company and of Commercial Assets have agreed to elect to
receive shares of the Company's Common Stock for all shares of Commercial Assets
common stock that they own.
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<PAGE>
E. Real Estate
Real estate at March 31, 2000 and December 31, 1999, was (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Land $ 25,767 $ 13,260
Land improvements and buildings 120,627 102,733
---------- -------
146,394 115,993
Less accumulated depreciation (8,123) (7,248)
---------- ---------
Real estate, net $ 138,271 $ 108,745
========== =========
</TABLE>
In January 2000, the Company purchased four manufactured home communities,
undeveloped homesites at three additional manufactured home communities,
inventory and other assets for $36,816,000. The purchase price was allocated as
follows (in thousands):
Real estate $ 29,618
Cash and cash equivalents 205
Other assets 6,993
----------
$ 36,816
==========
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, clubhouses, maintenance buildings and common amenities.
F. Investments in Participating Mortgages
During 1999, the Company had non-recourse mortgage loans secured by two
manufactured home communities and one recreational vehicle park in Arizona. The
loans had interest rates ranging from 10% to 15% and were scheduled to mature in
April 2001. The Company received additional interest of 3% of gross revenues,
increasing to 11% of gross revenues in the event of a refinancing of the debt on
the communities, and 50% of net proceeds from a sale or refinancing of the
communities. In August 1999, the Company purchased the two manufactured home
communities and the recreational vehicle park in exchange for the payment of
$858,000, the cancellation of the three loans with a carrying amount of
$11,973,000 and $761,000 of assumed liabilities and other costs.
During 1999, the Company had a non-recourse participating mortgage that bears
10% interest and matures in 2018. The Company receives additional interest up to
50% of the borrower's profit and net cash flows from the properties securing the
participating mortgage. In January 2000, the Company purchased for $36,816,000
the four manufactured home communities and the undeveloped homesites at three
additional manufactured home communities which secured the Company's
participating mortgage. The purchase price was paid as follows:
(in thousands)
Cancellation of participating mortgages and loans $ 24,851
Assumption of debt 10,704
Issuance of 44,572 OP Units 496
Cash 765
---------
$ 36,816
=========
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<PAGE>
G. Investment in Commercial Assets
The Company owns 2,761,126 shares (approximately 27%) of the common stock of
Commercial Assets. In November 1997, Commercial Assets sold or resecuritized its
entire portfolio of commercial mortgage loan securitizations of multi-family
real estate ("CMBS bonds") and temporarily invested the proceeds until it
determined which type of real estate assets to invest in. During the third
quarter of 1998, Commercial Assets began acquiring manufactured home
communities, and from August 1998 to March 2000, it has invested approximately
$70 million for interests in 12 communities.
Summarized financial information of Commercial Assets as reported by Commercial
Assets is (in thousands):
<TABLE>
<CAPTION>
Balance Sheets March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Cash and short-term investments $ 24,831 $ 17,166
Real estate, net (including participating mortgages and joint ventures) 69,984 68,353
Other assets 11,193 11,564
----------- -----------
Total assets $ 106,008 $ 97,083
=========== ===========
Secured long-term notes payable $ 30,551 $ 20,442
Other liabilities 1,761 1,945
Minority interest in subsidiaries 615 615
Stockholders' equity 73,081 74,081
----------- -----------
Total liabilities and stockholders' equity $ 106,008 $ 97,083
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Statements of Income Three Months Ended
March 31,
---------
2000 1999
---- ----
<S> <C> <C>
Rental and other property revenues $ 1,783 $ --
Income from participating mortgages and leases 77 587
Property operating expenses (661) --
Depreciation (493) (89)
--------- ---------
Income from rental property operations 706 498
Interest and other income 508 739
Interest expense (364) --
Equity in loss from home sales operations (191) --
General and administrative (121) (133)
Related-party management fees (193) (80)
Related-party acquisition fees -- (42)
--------- ---------
Net income $ 345 $ 982
========= =========
</TABLE>
H. Investment in Home Sales Company
Effective January 1, 2000, a consolidated subsidiary ("Sales Corp.") of the
Company acquired all of the manufactured home inventory located at communities
owned by the Company or Commercial Assets for $8,452,000. The Company owns 65%
of the nonvoting common stock of Sales Corp., Commercial Assets owns the
remaining 35% of the nonvoting common stock and certain of the Company's
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officers own all of Sales Corp.'s voting common stock. The nonvoting common
stock represents 99% of all outstanding shares of Sales Corp.'s capital stock.
The inventory purchase price was paid as follows:
<TABLE>
<CAPTION>
<S> <C>
Assumption of secured short-term financing $ 4,594
Cancellation of participating mortgages and notes receivable 1,805
Assumption of notes payable 403
Assumption of accounts payable and accrued liabilities, net of other assets received 649
Contribution by Commercial Assets 1,001
--------
$ 8,452
========
</TABLE>
I. Secured Short-Term Financing
The Company has a revolving line of credit with a bank that bears interest at
the 30-day London Interbank Offered Rate ("LIBOR") plus 1.75% per annum (7.88%
at March 31, 2000). The line of credit is secured by 1,015,674 shares of the
common stock of Commercial Assets held by the Company and matures in September
2000. The line of credit is limited to the lesser of (1) $5,000,000, (2) 65% of
the product of the trading price of Commercial Assets common stock times
1,015,674 or (3) 65% of the purchase price of certain unpledged real estate. As
of March 31, 2000, the limit was $3,218,000 and $2,550,000 was outstanding on
this line of credit. In April 2000, this line of credit was cancelled and
replaced by a $15,000,000 line of credit (see description below).
In connection with the Company's January 2000 purchase of manufactured home
communities, undeveloped homesites, inventory and other assets, the Company
assumed a line of credit secured by the inventory. At March 31, 2000, the
balance on the line of credit was $5,292,000. In April, this line of credit was
cancelled and replaced by a $15,000,000 line of credit (see description below).
In April 2000, the Company entered into a revolving $15,000,000 line of credit
with a bank. The line of credit bears interest at the bank's prime rate and
matures in May 2001. The line of credit is secured by three manufactured home
communities and one recreational vehicle park which have a combined net book
value of $22,755,000 at March 31, 2000. The line of credit replaced the
Company's two existing lines of credit and a $5,993,000 recourse note payable
due in April 2001.
As of March 31, 2000, the Company had a $2,120,000 promissory note payable to
Community Management Investors Corporation ("CMIC") that matures in January 2001
and bears interest at 8.5%. The Company purchased CMIC's 50% interest in two
property management companies as of January 1, 2000 in exchange for the note
payable. This resulted in the Company owning 100% of the property management
companies. The Company's President and Chief Operating Officer owns 35% of CMIC,
and the Company's Vice President of Development owns 20% of CMIC.
J. Commitments and Contingencies
In connection with the purchase of a manufactured home community, the Company
has an earn-out agreement with respect to unoccupied homesites. The Company pays
$17,000 for each newly occupied homesite either in the form of cash or 946 OP
Units, as determined by the former owner. During each of the three months ended
March 31, 2000 and 1999, the Company paid $83,000 in cash. At March 31, 2000,
there were 108 unoccupied homesites subject to the earnout.
In September 1999, four Commercial Assets stockholders, individually and as
purported representatives of all Commercial Assets stockholders, except the
Company and its affiliates, filed three purported class action lawsuits in
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<PAGE>
Delaware against Commercial Assets, the members of the board of directors and
certain officers of the Company and Commercial Assets. These lawsuits alleged
that the defendants breached their fiduciary duties to the Commercial Assets
stockholders in connection with the proposed merger of the Company and
Commercial Assets and Commercial Assets' recent reincorporation in Delaware. In
November 1999, these lawsuits were consolidated into a single lawsuit. In March
2000, the parties entered into a settlement agreement, subject to the court's
approval, which amended the merger agreement as follows:
o Commercial Assets stockholders, other than the Company and the officers and
directors of the Company and Commercial Assets, may elect to receive $5.75
per share in cash for up to 3,549,868 shares of Commercial Assets common
stock with any remaining shares receiving 0.4075 shares of the Company's
Common Stock; and
o the percentage of votes of Commercial Assets common stock needed to approve
the merger was increased from a simple majority to two-thirds.
K. Operating Segments
Investments in adult communities constitute substantially all of the Company's
portfolio of manufactured home communities, and as such, management of the
Company assesses the performance of the Company as one operating segment.
L. Common Stock and Dividends
During 1999, certain directors and executive officers (or entities affiliated
with them) exercised options to purchase 46,000 shares of Common Stock by
issuing notes receivable totaling $588,000. The notes accrue interest at 7.5%
and mature in 2009. At March 31, 2000, $403,000 of the notes were nonrecourse
and $177,000 were recourse to the respective directors or executive officers.
During the three month periods ended March 31, 2000 and 1999, the Company paid
$0.25 per share dividends on Common Stock and OP Units totaling $1,669,000 and
$1,640,000, respectively.
M. Other Matters
The Commercial Assets Management Agreement has been extended through December
31, 2000; however, the agreement will terminate upon the merger of the Company
and Commercial Assets. The Company earned management fees under the Commercial
Assets Management Agreement (net of elimination for the Company's 27% ownership
of Commercial Assets) as follows:
Three Months Ended
March 31,
---------
2000 1999
---- ----
Management fees $141,000 $ 89,000
As of March 31, 2000, the net book value of the Commercial Assets Management
Agreement was $1,269,000 and is included in other assets.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Introduction
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this report and our other filings with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, as well as information communicated orally or
in writing between the dates of these SEC filings, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may include projections of our cash flow,
dividends and anticipated returns on real estate investments. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. These factors include: general
economic and business conditions; interest rate changes; financing and
refinancing risks; risks inherent in owning real estate or debt secured by real
estate; future development rate of homesites; competition; the availability of
real estate assets at prices which meet our investment criteria; our ability to
reduce expense levels, implement rent increases, use leverage, sell homes and
other risks set forth in our SEC filings.
In this report, the words "the Company," "we," "our" and "us" refer to Asset
Investors Corporation, a Delaware corporation, our predecessor, Asset Investors
Corporation, a Maryland corporation and, where appropriate, our subsidiaries.
Business
Company Background
We have been a Delaware corporation since May 25, 1999. Prior to this, we were a
Maryland corporation that was formed in 1986. We have elected to be treated for
United States federal income tax purposes as a real estate investment trust or
"REIT." We are a self-administered and self-managed company in the business of
owning, acquiring, developing and managing manufactured home communities. As of
March 31, 2000, we held interests as owner or ground lessee in 21 manufactured
home communities and two recreational vehicle parks with a total of:
o 4,410 developed homesites (sites with homes in place);
o 2,490 undeveloped homesites; and
o 180 recreational vehicle sites.
In addition, we manage 14 communities for affiliates and third-party owners. Our
shares of common stock are listed on the New York Stock Exchange under the
symbol "AIC."
We primarily conduct our business through our subsidiary Asset Investors
Operating Partnership and where appropriate, its other subsidiary companies,
which we collectively refer to as the Operating Partnership. As of March 31,
2000, we owned 84% of the Operating Partnership. The Operating Partnership also
owns 27% of the common stock of Commercial Assets, Inc., a publicly-traded REIT
that is listed on the American Stock Exchange under the symbol "CAX." Commercial
Assets is also engaged in the ownership, acquisition and development of
- 12 -
<PAGE>
manufactured home communities. In addition to acquiring and managing
manufactured home communities for our own account, we also perform these
services for Commercial Assets, for which Commercial Assets pays us a management
fee.
Proposed Merger with Commercial Assets
In August 1999, we agreed to merge with Commercial Assets. We agreed to issue
0.4075 shares of our common stock for each share of Commercial Assets common
stock. Alternatively, Commercial Assets stockholders may elect to receive $5.75
per share in cash for up to 3,549,868 shares of Commercial Assets common stock
with any remaining shares of Commercial Assets common stock receiving 0.4075
shares of our common stock. The merger requires the approval by a majority of
our outstanding shares of common stock and two-thirds of the outstanding shares
of Commercial Assets common stock. We own 27% of the outstanding shares of
Commercial Assets common stock and have agreed to vote these shares in favor of
the merger. Commercial Assets' officers and directors and our officers and
directors have agreed to elect to receive Asset Investors common stock for all
shares of Commercial Assets common stock that they own.
Industry Background
A manufactured home community is a residential subdivision designed and improved
with sites for the placement of manufactured homes and related improvements and
amenities. Manufactured homes are detached, single-family homes which are
produced off-site by manufacturers and installed on sites within the community.
Manufactured homes are available in a variety of designs and floor plans,
offering many amenities and custom options.
Modern manufactured home communities are similar to typical residential
subdivisions containing centralized entrances, paved streets, curbs and gutters
and parkways. The communities frequently provide a clubhouse for social
activities and recreation and other amenities, which may include golf courses,
swimming pools, shuffleboard courts and laundry facilities. Utilities are
provided by or arranged for by the owner of the community. Community lifestyles,
primarily promoted by resident managers, include a wide variety of social
activities that promote a sense of neighborhood. The communities provide an
attractive and affordable housing alternative for retirees, empty nesters and
start-up or single-parent families. Manufactured home communities are primarily
characterized as "all age" communities and "adult" communities. Adult
communities typically require that at least 80% of the tenants be at least 55
years old, and in all age communities there is no age restriction on tenants.
The owner of a home in our communities leases from us the site on which the home
is located. Typically, the leases are on a month-to-month or year-to-year basis,
renewable upon the consent of both parties or, in some instances, as provided by
statute. In some circumstances, we offer a 99-year lease to tenants in order to
enable the tenant to have some benefits of an owner of real property, including
creditor protection laws in some states. These leases can be cancelled,
depending on state law, for non-payment of rent, violation of community rules
and regulations or other specified defaults. Generally, rental rate increases
are made on an annual basis. The size of these rental rate increases depends
upon the policies that are in place at each community. Rental increases may be
based on fixed dollar amounts, percentage amounts, inflation indexes, or they
may depend entirely on local market conditions. We own interests in the
underlying land, utility connections, streets, lighting, driveways, common area
amenities and other capital improvements and are responsible for enforcement of
community guidelines and maintenance. Each homeowner within the manufactured
home communities is responsible for the maintenance of his or her home and
leased site, including lawn care in some communities.
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<PAGE>
The ownership of manufactured home communities, once fully occupied, tends to be
a stable, predictable asset class. The cost and effort involved in relocating a
home to another manufactured home community generally encourages the owner of
the home to resell it within the community.
Growth and Operating Strategies
We measure our economic profitability based on Funds From Operations or "FFO",
less an annual capital replacement reserve of at least $50 per developed
homesite. This reserve is management's estimate based on its experience in
owning, operating and managing manufactured home communities. We believe that
the presentation of FFO, when considered with the financial data determined in
accordance with generally accepted accounting principles, provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to us, nor should it
be considered as an alternative to net income as an indicator of operating
performance. The Board of Governors of the National Association of Real Estate
Investment Trusts, also known as NAREIT, defines FFO as net income or loss,
computed in accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus real estate
related depreciation and amortization, excluding amortization of financing
costs, and after adjustments for unconsolidated partnerships and joint ventures.
We calculate FFO beginning with the NAREIT definition and include adjustments
for:
o the minority interest in the Operating Partnership owned by persons other
than us; and
o amortization of property and investment management contracts.
We believe that the presentation of FFO provides investors with measurements
which help facilitate an understanding of our ability to make required dividend
payments, capital expenditures and principal payments on our debt. Since FFO
excludes depreciation and other real estate related expenses, FFO may be
materially different from net income. Therefore, FFO should not be considered as
an alternative to net income or net cash flows from operating activities, as
calculated in accordance with generally accepted accounting principles, as an
indication of our operating performance or liquidity.
FFO is not necessarily indicative of cash available to fund our cash needs,
including our ability to make distributions. We use FFO in measuring our
operating performance because we believe that the items that result in a
difference between FFO and net income do not impact the ongoing operating
performance of a real estate company. Also, we believe that other real estate
companies, analysts and investors utilize FFO in analyzing the results of real
estate companies. Our basis of computing FFO is not necessarily comparable with
that of other REITs.
Our primary objective is to maximize stockholder value by increasing the amount
and predictability of FFO on a per share basis, less a reserve for capital
replacements. We seek to achieve this objective primarily by:
o improving net operating income from our existing portfolio of manufactured
home communities;
o acquiring additional communities at values that are accretive on a per
share basis;
o earning increased management fees as Commercial Assets invests in more
manufactured home communities; and
o as Commercial Assets' FFO increases, our share of their FFO similarly
increases.
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<PAGE>
Company Policies
Management has adopted specific policies to accomplish our objective of
increasing the amount and predictability of our FFO on a per share basis, less a
reserve for capital replacements. These policies include:
o selectively acquiring manufactured home communities that have potential
long-term appreciation of value through, among other things, rent
increases, expense efficiencies and in-park homesite development;
o developing and maintaining resident satisfaction and a reputation for
quality communities through maintenance of the physical condition of our
communities and providing activities that improve the community lifestyle;
o improving the profitability of our communities through aggressive
management of occupancy, community development and maintenance and expense
controls;
o using debt leverage to increase our financial returns;
o reducing our exposure to interest rate fluctuations by utilizing long-term,
fixed-rate, fully-amortizing debt to pay off higher cost, short-term debt;
o ensuring the continued maintenance of our communities by providing a
minimum $50 per homesite per year for capital replacements;
o seeking to reduce our exposure to downturns in regional real estate markets
by diversifying our portfolio of communities since currently 70% of our
properties are in Florida and 17% are in Arizona; and
o recruiting and retaining capable community management personnel.
Future Acquisitions
Our acquisition of interests in manufactured home communities takes many forms.
In many cases we acquire fee title to the community. When a community has a
significant number of unleased homesites, we seek a stable return from the
community during the development and lease-up phase while also seeking to
participate in future increased earnings after development is completed and the
sites are leased. We seek to accomplish this goal by making loans to development
companies in return for participating mortgages that are non-recourse to the
borrowers and secured by the property. In general, our participating mortgages
earn interest at fixed rates and, in addition, participate in the profits or
revenues from the community. This profit participation right generally entitles
us to 50% of the net income and cash flow generated by the community.
We believe that acquisition opportunities for manufactured home communities are
attractive at this time because of:
o the increasing acceptability of and demand for manufactured homes, as shown
by the growth in the number of individuals living in manufactured homes;
and
o the continued constraints on development of new manufactured home
communities.
We are actively seeking to acquire additional communities on our own behalf and
on behalf of Commercial Assets, and we are currently engaged in various stages
of negotiations relating to the possible acquisition of a number of communities.
The acquisition of interests in additional communities could also result in our
becoming increasingly leveraged as we incur debt in connection with these
transactions.
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<PAGE>
When evaluating potential acquisitions, we consider such factors as:
o the location and type of property;
o the value of the homes located on the leased land;
o the improvements, such as golf courses and swimming pools, at the property;
o the current and projected cash flow of the property and our ability to
increase cash flow;
o the potential for capital appreciation of the property;
o the terms of tenant leases, including the potential for rent increases;
o the tax and regulatory environment of the community in which the property
is located;
o the potential for expansion of the physical layout of the property and the
number of sites;
o the occupancy and demand by residents for properties of a similar type in
the vicinity;
o the credit of the residents in a community;
o the prospects for liquidity through sale, financing or refinancing of the
property;
o the competition from existing manufactured home communities;
o the potential for the construction of new communities in the area; and
o the replacement cost of the property.
In order to allocate investments between us and Commercial Assets, we now
coordinate our acquisitions with Commercial Assets on a case-by-case basis.
Fees and Earnings from Commercial Assets
We manage Commercial Assets and own 27% of Commercial Assets common stock. Under
the terms of our management agreement with Commercial Assets, we receive the
following fees:
o Acquisition Fees equal to 0.5% of the cost of each real estate-related
asset acquired by Commercial Assets;
o Base Fees equal to 1% per year of the net book value of Commercial Assets'
real estate-related assets;
o Incentive Fees equal to 20% of the amount by which Commercial Assets' FFO,
less an annual capital replacement reserve of at least $50 per developed
homesite, exceeds (a) its average net worth, multiplied by (b) 1% over the
ten year United States Treasury rate.
In the third quarter of 1998, Commercial Assets entered the manufactured home
community business and began acquiring interests in manufactured home
communities identified by us. As of March 31, 2000, Commercial Assets had
acquired interests in 12 communities at a cost of approximately $70 million.
Commercial Assets paid us Base Fees, Acquisition Fees and Incentive Fees
primarily due to Commercial Assets' investment in communities as follows:
Three Months Ended
March 31,
---------
2000 1999
------------ ----------
Base Fees $ 193,000 $ 80,000
Acquisition Fees -- 42,000
Incentive Fees -- --
------------ ----------
$ 193,000 $ 122,000
============ ==========
The management agreement expires December 31, 2000 and is subject to annual
renewal. The management agreement will terminate if we merge with Commercial
Assets.
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<PAGE>
Expansion of Existing Communities
We seek to increase the number of homesites and the amount of earnings generated
from our existing portfolio of manufactured home communities through marketing
campaigns aimed at increasing occupancy. We also seek expansion through future
acquisitions and expansion of the number of sites available to be leased to
residents if justified by local market conditions and permitted by zoning and
other applicable laws. As of March 31, 2000, we held interests in 11 communities
with 2,490 undeveloped homesites.
Taxation of the Company
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986,
and we intend to operate in a manner which will allow us to avail ourselves of
the beneficial tax provisions applicable to REITs. Our qualification as a REIT
depends on our ability to meet the various requirements imposed by the Internal
Revenue Code, such as specifications relating to actual operating results,
distribution levels and diversity of stock ownership. In addition, our ability
to qualify as a REIT depends in part upon the actions of third parties over
which we have no control, or only limited influence. For instance, our
qualification depends upon the conduct of certain entities with which we have a
direct or indirect relationship, in our capacity as a lender, lessor, or holder
of non-controlling equity interests. Our qualification also depends upon
Commercial Assets' continued qualification as a REIT.
If we qualify for taxation as a REIT, we will generally not be subject to
Federal corporate income tax on our net income that is currently distributed to
stockholders. This treatment substantially eliminates the "double taxation"
which would otherwise occur at the corporate and stockholder levels that
generally results from investment in a corporation. If we fail to qualify as a
REIT in any taxable year, we will be subject to Federal income tax at regular
corporate rates on our taxable income, including any applicable alternative
minimum tax. We have a net operating loss or "NOL" carryover of approximately
$95 million which may, subject to some restrictions and limitations, be used to
offset taxable income in the event that we fail to qualify as a REIT.
Additionally, even if we qualify as a REIT, we may be subject to certain state
and local income and other taxes and to Federal income and excise taxes on our
undistributed income.
RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2000
Comparison of Three Months Ended March 31, 2000 to Three Months Ended March 31,
1999
Rental Property Operations
Rental and other property revenues from our owned properties totaled $4,469,000
for the three months ended March 31, 2000 compared to $3,558,000 for the three
months ended March 31, 1999, an increase of $911,000 or 25.6%. The increase was
primarily a result of rent increases at our communities and our purchase of
communities in January 2000.
Property operating expenses from our owned properties totaled $1,709,000 for the
three months ended March 31, 2000 compared to $1,287,000 for the same period in
1999, an increase of $422,000 or 32.8%. The increase was primarily due to higher
expenses at our communities and our purchase of communities in January 2000.
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<PAGE>
Income on participating mortgages and leases was $705,000 for the three months
ended March 31, 2000 compared to $778,000 for the three months ended March 31,
1999. We ceased to have participating mortgages in the first quarter of 2000.
Also, we had $600,000 in income during the first quarter of 2000 as a result of
the repayment of these mortgages. Income from participating mortgages and leases
is expected to decrease significantly as we no longer hold any investments in
participating mortgages.
Depreciation expense was $1,089,000 during the three months ended March 31, 2000
compared to $920,000 during the same period in 1999. The increase was due to
acquisitions of manufactured home communities during 1999 and 2000.
Sales Operations
Beginning in January 2000, we commenced home sales activities to sell
manufactured homes to be placed on our undeveloped homesites. The homeowner will
then pay rent to us for locating his or her home on our land. During the three
months ended March 31, 2000, we sold 33 homes and had a loss of $377,000 from
sales operations, after Commercial Assets' minority interest in the loss.
Service Operations
Property management income was comparable for the three months ended March 31,
2000 and 1999.
Fee revenue from managing Commercial Assets was $141,000 and $89,000 for the
three months ended March 31, 2000 and 1999, respectively. The increase is due to
Commercial Assets' investments in communities during 1999.
Amortization of management contracts was $516,000 and $689,000 for the three
months ended March 31, 2000 and 1999, respectively. The decrease is due to
property management contracts becoming fully amortized during 1999.
Equity in Earnings of Commercial Assets
Income from our 27% interest in Commercial Assets was $208,000 and $295,000 for
the three months ended March 31, 2000 and 1999, respectively. Commercial Assets
reported to us that its income decreased by $637,000 primarily due to:
o $404,000 increase in depreciation on acquired manufactured home
communities,
o $71,000 increase in management fees paid to us, and
o $191,000 loss from home sales operations.
General and Administrative Expenses
Our general and administrative expenses were $437,000 and $338,000 for the three
months ended March 31, 2000 and 1999, respectively. The increase is primarily
due to increases in the number of personnel and related expenses.
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<PAGE>
Interest and Other Income
During the three months ended March 31, 2000 and 1999, interest and other income
was $190,000 and $53,000, respectively. The increase occurred primarily because
of a $109,000 gain on the sale of real estate during the 2000 period.
Interest Expense
During the three months ended March 31, 2000, interest expense was $894,000, of
which $106,000 is allocated to the sales operations. Interest expense for the
three months ended March 31, 1999 was $941,000. The decrease was primarily due
to capitalized interest on our undeveloped homesites during the 2000 period;
partially offset by the increased interest expense related to the sales
operations.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had cash and cash equivalents of $888,000. Our
principal activities that demand liquidity include our normal operating
activities, payments of principal and interest on outstanding debt, acquisitions
of or additional investments in properties, payments of dividends to
stockholders and distributions made to limited partners in the Operating
Partnership.
Our net cash provided by operating activities was $0.8 million during the three
months ended March 31, 2000, compared to $1.0 million during the same period in
1999. The $0.2 million decrease was primarily a result of a $1.1 million
increase in inventory and a $0.4 million loss from home sales operations;
partially offset by a $0.4 million increase in earnings before depreciation from
manufactured home communities and an increase in accounts payable and accrued
liabilities.
During the three months ended March 31, 2000, the net cash provided by investing
activities was $0.8 million compared with a net use of $1.6 million for the same
period in 1999. The increase is primarily due to $2.3 million in proceeds from
the sale of real estate in the 2000 period.
During the three months ended March 31, 2000, net cash used in financing
activities was $1.4 million compared with net cash provided of $1.3 million for
the same period in 1999. The decrease is primarily because of proceeds received
by the Company from secured long-term notes payable in the 1999 period.
We had a line of credit with a bank which matures in September 2000. The line of
credit was secured by 1,015,674 shares of our Commercial Assets common stock.
Advances under this line of credit bear interest at the 30-day London Interbank
Offered Rate plus 1.75% per annum (7.88% at March 31, 2000). The line of credit
was limited to the lesser of:
o $5,000,000;
o 65% of the product of the trading price of Commercial Assets common stock
times 1,015,674; or
o 65% of the purchase price of certain unpledged real estate.
In April 2000, this line of credit was replaced by a $15,000,000 line of credit
with a bank due in May 2001. This new line of credit bears interest at the
bank's prime rate and is secured by three manufactured home communities and one
recreational vehicle park. In addition to replacing the prior bank line of
credit, the new line of credit also replaced (a) a $3.4 million line of credit
assumed by us when we purchased inventory in January 2000 and (b) a $6.0 million
recourse note payable due in April 2001.
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<PAGE>
We expect to meet our long-term liquidity requirements through long-term,
secured borrowings, the issuance of OP Units and other equity securities and
cash generated by operations.
FUNDS FROM OPERATIONS
We measure our economic profitability based on FFO, less an annual capital
replacement reserve of at least $50 per developed homesite. We believe that the
presentation of FFO when considered with the financial data determined in
accordance with generally accepted accounting principles, provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to us, nor should it
be considered as an alternative to net income as an indicator of operating
performance. The Board of Governors of NAREIT defines FFO as net income or loss,
computed in accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus real estate
related depreciation and amortization, excluding amortization of financing
costs, and after adjustments for unconsolidated partnerships and joint ventures.
We calculate FFO beginning with the NAREIT definition and include adjustments
for:
o the minority interest in the Operating Partnership owned by persons other
than us, and
o amortization of property and investment management contracts.
We believe that the presentation of FFO provides investors with measurements
which help facilitate an understanding of our ability to make required dividend
payments, capital expenditures and principal payments on our debt. Since FFO
excludes depreciation and other real estate related expenses, FFO may be
materially different from net income. Therefore, FFO should not be considered as
an alternative to net income or net cash flows from operating activities, as
calculated in accordance with generally accepted accounting principles, as an
indication of our operating performance or liquidity.
FFO is not necessarily indicative of cash available to fund our cash needs,
including our ability to make distributions. We use FFO in measuring our
operating performance because we believe that the items that result in a
difference between FFO and net income do not impact the ongoing operating
performance of a real estate company, Also, we believe that other real estate
companies, analysts and investors utilize FFO in analyzing the results of real
estate companies. Our basis of computing FFO is not necessarily comparable with
that of other REITs.
For the three months ended March 31, 2000 and 1999, our FFO was (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
2000 1999
---- ----
<S> <C> <C>
Income before minority interest in Operating Partnership $ 855 $ 652
Real estate depreciation 1,089 920
Amortization of management contracts 516 689
Gain on sale of real estate (109) --
Equity in Commercial Assets' adjustments for FFO 131 22
--------- ---------
Funds From Operations (FFO) $ 2,482 $ 2,283
========= =========
Weighted average common shares and OP Units outstanding 6,617 6,562
========= =========
</TABLE>
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<PAGE>
For the three months ended March 31, 2000 and 1999, net cash flows were as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
2000 1999
---- ----
<S> <C> <C>
Cash provided by operating activities $ 854 $ 1,044
Cash provided by (used in) investing activities 845 (1,603)
Cash provided by (used in) financing activities (1,381) 1,273
</TABLE>
YEAR 2000 COMPLIANCE
Year 2000 issues have arisen because many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19". If not corrected, many computer applications could
fail or create erroneous results. The following disclosure provides information
regarding the current status of our Year 2000 compliance program.
Our hardware and software systems are currently Year 2000 compliant. Upon
failure of any system, data included in critical software, such as rent-rolls
and certain record-keeping systems, could be transferred to alternative
commercially available software at a reasonable cost and within a reasonable
time period. Consequently, we would be able to continue our business operations
without any material interruption or material effect on our business, results of
operations or financial condition.
Disruptions in the economy generally resulting from Year 2000 issues could also
materially adversely affect us. Moreover, because a large number of our tenants
may be dependent on social security payments to pay their rents, a failure of
the Social Security Administration to cause their systems to be Year 2000
compliant may result in a material adverse effect on our operations. The Social
Security Administration announced that their systems were Year 2000 compliant
before January 1, 2000. We have received oral representations from our third
party vendors indicating that they are substantially Year 2000 compliant.
We did not experience any Year 2000 problems during the first quarter of 2000.
We believe that the cost of modification or replacement of our less essential
accounting and reporting software and hardware that is not currently compliant
with Year 2000 requirements, if any, will not be material to our financial
position or results of operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our principal exposure to market risk is through our various debt instruments
and borrowings. The following is a list of these debt instruments and borrowing
arrangements.
We have a $15.0 million recourse, secured line of credit that bears interest at
the bank's prime rate. If the prime rate increased immediately by 1% then our
annual net income and cash flows would decrease by $150,000 due to an increase
in interest expense on this line of credit, based on the maximum balance of the
line of credit.
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<PAGE>
We have $42.2 million of fixed rate, fully amortizing, non-recourse, secured
long-term notes payable. We do not have significant exposure to changing
interest rates on these notes as the rates are fixed and the notes are fully
amortizing.
We have $7.5 million of fixed rate, non-recourse, secured long-term notes
payable that mature in October 2000. The rates on these notes range from 7.5% to
8.25% with a weighted average rate of 7.7%. We intend to refinance the notes
during 2000 with long-term, fully amortizing, fixed rate debt. Therefore,
changes in interest rates would affect the cost of funds borrowed in the future
to refinance the existing debt. If the interest rate on the refinanced debt was
1.0% greater than the weighted average rate on the existing debt, our annual net
income and cash flows would decrease by $75,000 due to an increase in interest
expense on these notes, based on the outstanding balances at March 31, 2000. We
believe that the effect, if any, of near-term changes in interest rates on our
financial position, results of operations or cash flows for 2000 would not be
material as the existing debt is fixed rate through September 2000.
We have a $2.5 million fixed rate, partially amortizing, non-recourse, secured
long-term note payable that matures in April 2009. We do not have significant
exposure to changes in interest rates since the interest rate is fixed and the
balance due at maturity is $2 million.
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of March 15, 1999,
between Asset Investors Corporation, a Maryland corporation and
Asset Investors Corporation, a Delaware corporation
(incorporated herein by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, dated May 26, 1999,
Commission File No. 1-9360, filed on May 26, 1999).
3.1 Amended and Restated Certificate of Incorporation of Asset
Investors Corporation (incorporated herein by reference to
Exhibit 3.1 to the Registrant's Current Report on Form 8-K,
dated May 26, 1999, Commission File No. 1-9360, filed on May 26,
1999).
3.2 Amended and Restated By-laws of Asset Investors Corporation
(incorporated herein by reference to Exhibit 3.2 to the
Registrant's Current Report on Form 8-K, dated May 26, 1999,
Commission File No. 1-9360, filed on May 26, 1999).
10.13 Revolving Promissory Note dated April 7, 2000, between Asset
Investors Operating Partnership, L.P., Community Savanna Club
Joint Venture, AIOP Lost Dutchman Notes, LLC and U. S. Bank
National Association
10.13(a) Line of Credit Agreement dated April 7, 2000, between Asset
Investors Operating Partnership, L.P., AIOP Florida Properties
I, L.L.C., AIOP Florida Properties II, L.L.C., Community Savanna
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<PAGE>
Club Joint Venture, AIOP Lost Dutchman Notes, LLC and U. S. Bank
National Association
10.13(b) Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Revenues dated April 7, 2000, between
AIOP Lost Dutchman Notes, LLC and U. S. Bank National
Association
10.13(c) Mortgage, Security Agreement, Financing Statement and Absolute
Assignment of Rents and Revenues dated April 7, 2000, between
Community Savanna Club Joint Venture and U. S. Bank National
Association
10.13(d) Security Agreement dated April 7, 2000, between Asset Investors
Operating Partnership, L.P., AIOP Lost Dutchman Notes, LLC and
U. S. Bank National Association
10.13(e) Security Agreement dated April 7, 2000, between Asset Investors
Operating Partnership, L.P., Community Savanna Club Joint
Venture and U. S. Bank national Association
27 Financial Data Schedule
(b) Reports on Form 8-K:
The following Current Reports on Form 8-K were filed by the
Registrant during the period covered by this Quarterly Report
on Form 10-Q:
Current Report on Form 8-K, dated January 19, 2000 reporting
the acquisition of 50% of two property management companies.
Current Report on Form 8-K/A, dated January 31, 2000 reporting
the acquisition of four manufactured home communities and
undeveloped homesites at three manufactured home communities.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ASSET INVESTORS CORPORATION
(Registrant)
Date: May 12, 2000 By /s/David M. Becker
--------------------------------
David M. Becker
Chief Financial Officer
- 23 -
REVOLVING PROMISSORY NOTE
$ 15,000,000.00 Denver, Colorado
April 7, 2000
FOR VALUE RECEIVED, the undersigned ASSET INVESTORS OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership ("Borrower"), and COMMUNITY
SAVANNA CLUB JOINT VENTURE, and AIOP LOST DUTCHMAN NOTES, LLC (each, a
"Co-Maker") hereby promise to pay to the order of U. S. BANK NATIONAL
ASSOCIATION ("Bank") at 918 Seventeenth Street, Fifth Floor, Denver, Colorado
80202, or at such other place as Bank may, from time to time designate in
writing, the principal sum of FIFTEEN MILLION AND NO/100THS DOLLARS
($15,000,000.00), or so much of that sum as may be advanced under this Note by
the Bank, with principal and interest thereon payable as specified in this Note.
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Line of Credit Agreement (defined below).
1. Principal and Interest. Interest shall accrue on the Loan from and
after the date of disbursement ("Disbursement Date") at an annual rate equal to
the Reference Rate (the "Interest Rate"). The Interest Rate shall be adjusted on
a daily basis as and when such Reference Rate changes, shall be payable as set
forth below, and shall be calculated on the actual days outstanding over a 360
day year.
2. Reference Rate Definition. "Reference Rate" means the rate
determined and announced by the Bank from time to time as the Bank's Reference
Rate of interest. The Bank may lend to customers at rates that are at, above, or
below the Reference Rate.
3. Payment and Maturity Dates. Principal and interest shall be payable
as follows:
(a) in arrears, on the first (1st) day of the month following the
date hereof, and on the first (1st) day of each month thereafter until this Note
matures, payments of interest only accruing on the outstanding principal
balance; and
(b) on May 31, 2001 (the "Maturity Date"), subject to the Borrower's
right to extend set forth in the Line of Credit Agreement, the entire unpaid
principal amount and any interest accrued but remaining unpaid and all other
sums due under this Note
All installments of principal and interest of this Note are payable only in
lawful money of the United States of America, at such place as the holder hereof
may designate in writing from time to time.
4. Revolving Loan. Up to Fifteen Million and 00/100 Dollars
($15,000,000.00) of the principal amount of this Note may be disbursed, repaid
and reborrowed in accordance with the terms of the Line of Credit Agreement,
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provided that the aggregate of such advances outstanding at any time does not
exceed $15,000,000.00.
5. Prepayment. This Note may be prepaid, either in whole or in part at
any time without premium or penalty and without the prior consent of the Bank
hereof, on the condition that Borrower shall concurrently pay all accrued
interest on the amount of principal outstanding at the time of each prepayment
and any other charges then due and that Borrower shall provide Bank with five
(5) days' prior written notice of the amount of the prepayment.
6. Default and Acceleration. Time is of the essence of this Note. Upon
the occurrence of an Event of Default as defined in the Line of Credit
Agreement, at the option of the holder hereof, the entire debt then remaining
unpaid at once shall become due and payable without notice and the liens given
to secure the payment of this Note may be foreclosed and Bank may pursue all
rights and remedies available under this Note or any instrument securing payment
of this Note.
7. Default Rate of Interest. In the Event of Default, Borrower and
Co-Makers promise to pay interest on the principal balance of this Note together
with all sums due and owing under the Note or the Loan Documents then
outstanding at a rate of interest ("Default Rate") equal to the greater (a) of
eighteen percent (18%) per annum, or (b) five percent (5%) per annum in excess
of the Interest Rate then applicable, provided that any interest which has
accrued at the Default Rate shall be paid at the time of and as a condition
precedent to the curing of any default under any statutory right to cure. The
fluctuating Default Rate at which interest accrues shall be adjusted
simultaneously, at each announced change of the Reference Rate. Failure to
exercise such option or charge such increased interest shall not be a waiver of
the right to do so at any future time or with respect to any other default.
8. Late Charges. If Borrower and Co-Makers shall fail to make any
payment of interest or principal, including the final combined principal and
interest installment, within ten (10) days after the date the same is due and
payable, a late charge by way of damages shall be immediately due and payable.
Borrower and Co-Makers recognize that default by Borrower and Co-Makers in
making the payments herein agreed to be paid when due will result in the holder
incurring additional expense in servicing the Loan, in loss to the holder of the
use of the money due and in frustration to the holder in meeting its other
financial and loan commitments. Borrower and Co-Makers agree that, if for any
reason Borrower and Co-Maker fail to pay the amounts due under this Note within
ten (10) days after the date the same is due and payable, the holder hereof
shall be entitled to damages for the detriment caused thereby, and that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower and Co-Makers therefore agree that a sum equal to four percent (4%) of
each payment which becomes delinquent is a reasonable estimate of said damages
to the holder of this Note, which sum Borrower and Co-Makers agree to pay on
demand.
9. Remedies Cumulative. The rights or remedies of the Bank as provided
in this Note and any instrument securing payment of this Note shall be
cumulative and concurrent and may be pursued singly, successively, or together
against the Borrower and Co-Makers, the real property described in the Loan
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Documents, and any other funds, property or security held by Bank for the
payment hereof or otherwise at the sole discretion of the Bank. The failure to
exercise any such right or remedy shall in no event be construed as a waiver or
release of such rights or remedies or the right to exercise them at any later
time.
10. Forbearance. Any forbearance of Bank in exercising any right or
remedy hereunder or under the Loan Documents, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any right
or remedy. The acceptance by Bank of payment of any sum payable hereunder after
the due date of such payment shall not be a waiver of Bank's right to either
require prompt payment when due of all other sums payable hereunder or to
declare a default for failure to make prompt payment. Bank shall at all times
have the right to proceed against any portion of the security held herefor in
such order and in such manner as Bank may deem fit, without waiving any rights
with respect to any other security. No delay or omission on the part of Bank in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note.
11. Right of Setoff. In addition to all liens upon, and the rights of
setoff against, the monies, securities and other property of Borrower or any
Co-Maker given to the Bank, the Bank shall have a lien upon, and a right of
setoff against, all monies, securities and other property of Borrower, any
Co-Maker, now or hereafter in the possession of the Bank, whether for
safekeeping or otherwise. In the event of a default under this Note, the Bank
shall have the right to take amounts due from any deposit balances Borrower or
any Co-Maker has with the Bank, regardless of any penalty that may apply when
the Bank exercises such right, and apply such amounts for the outstanding
balance of amounts due under this Note.
12. Application of Payments. All payments made on this Note shall be
applied first to any collection costs the Bank may have incurred by procuring
Borrower's performance hereunder, then to payment of the interest then accrued
and due on the unpaid principal balance of this Note, then to any other sums due
to the Bank under the Loan Documents, then to the Prepayment Premium, if
applicable, and the remainder of all such payments shall be applied to the
reduction of the unpaid principal.
13. Waivers. Borrower and any sureties, guarantors and endorsers and
Co-Makers (severally each called a "Surety") waive presentment, protest and
demand, notice of protest, demand and of dishonor and non-payment of this Note,
and expressly agree that this Note, or any payment hereunder, may be extended
from time to time without in any way affecting the liability of the Borrower and
each Surety hereof. Borrower and any Surety further agree that at any time and
from time to time without notice the terms of payment herein may be modified or
the security described in the Loan Documents released in whole or in part, or
increased, changed or exchanged by agreement between the Bank and any owner of
the property affected by said Loan Documents without in anywise affecting the
liability of any party to this instrument or any person liable or to become
liable with respect to any indebtedness evidenced hereby.
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In addition, Borrower and each Surety waives and agrees not to assert:
(a) any right to require holder to proceed against Borrower or any other Surety,
to proceed against or exhaust any security for the Note, to pursue any other
remedy available to Bank, or to pursue any remedy in any particular order or
manner; (b) the benefit of any statute of limitations affecting its liability
hereunder or the enforcement hereof; (c) the benefits of any legal or equitable
doctrine or principle of marshalling; (d) notice of the existence, creation or
incurring of new or additional indebtedness of Borrower to Bank; (e) the
benefits of any statutory provision limiting the liability of a surety, to the
extent applicable; (f) any defense arising by reason of any disability or other
defense of Borrower or by reason of the cessation from any cause whatsoever
(other than payment in full) of the liability of Borrower for payment of the
Note; and (g) the benefits of any statutory provision limiting the right of Bank
to recover a deficiency judgment, or to otherwise proceed against any person or
entity obligated for payment of the Note, after any foreclosure or trustee's
sale of any security for the Note. Until payment in full of the Note, no Surety
shall have any right of subrogation and each hereby waives any right to enforce
any remedy which Bank now has, or may hereafter have, against Borrower or any
other Surety, and waives any benefit of, and any right to participate in, any
security now or hereafter held by Bank.
14. Usury. In the event the interest provisions hereof or any exactions
provided for herein or in the Loan Documents or any other instrument securing
this Note shall result, because of any reduction of principal, or for any reason
at any time during the life of this Loan, in any effective rate of interest
which, for any month, transcends the limit of the usury or any other law
applicable to the Loan, all sums in excess of those lawfully collectible as
interest for the period in question shall, without further agreement or notice
between or by any party hereto, be applied upon principal immediately upon
receipt of such moneys by Bank, with the same force and effect as though the
payor had specifically designated such extra sums to be so applied to principal
and Bank had agreed to accept such extra payment as a premium-free prepayment.
In no event shall any agreed to or actual exaction as consideration for this
Loan transcend the limits imposed or provided by the laws applicable to this
transaction or the Borrower hereof in the jurisdiction in which the Property is
located for the use or detention of money or for forbearance in seeking its
collection.
15. Loan Documents. This Note is executed by Borrower and Co-Makers in
connection with that certain Line of Credit Agreement between Borrower,
Co-Makers and Bank dated as of the date hereof (the "Line of Credit Agreement"),
and this Note is secured by, among other things, (a) a Deed of Trust, Security
Agreement, Financing Statement and Assignment of Rents and Revenues ("Arizona
Deed of Trust") dated as of the date hereof, on real estate situated in the
County of Maricopa, Arizona, and (b) a Mortgage, Security Agreement, Financing
Statement and Absolute Assignment of Rents and Revenues ("Florida Mortgage")
dated as of the date hereof, on real estate situated in the County of St. Lucie,
Florida, and other documents and instruments evidencing and securing repayment
of the Loan (collectively, the "Loan Documents"). The Arizona Deed of Trust and
the Florida Mortgage are collectively called the "Deed of Trust." The Line of
Credit Agreement and the Deed of Trust contain provisions for the acceleration
of the maturity of this Note. In the event of any conflict between any provision
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of the Line of Credit Agreement and any provisions of this Note, the provision
of the Line of Credit Agreement shall control.
16. Preferential Payment. Borrower and each Co-Maker agree that to the
extent Borrower or any Surety makes any payment to Bank in connection with the
indebtedness evidenced by this Note, and all or any part of such payment is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid by Bank or paid over to a trustee, receiver or any
other entity, whether under any bankruptcy act or otherwise (any such payment is
hereinafter referred to as a "Preferential Payment"), then the indebtedness of
Borrower and Co-Makers under this Note shall continue or shall be reinstated, as
the case may be, and, to the extent of such payment or repayment by Bank, the
indebtedness evidenced by this Note or part thereof intended to be satisfied by
such Preferential Payment shall be revived and continued in full force and
effect as if said Preferential Payment had not been made.
17. Governing Law; Jurisdiction. This Note is to be governed according
to the laws of Colorado, without giving effect to principles of conflict.
Without limiting the right of the Bank to bring any action or proceeding against
Borrower or any Surety or against any property of Borrower or any Surety (an
"Action") arising out of or relating to this Note or any indebtedness evidenced
hereby in the courts of other jurisdictions, Borrower and each Surety hereby
irrevocably submit to the jurisdiction, process and venue of any Colorado State
or Federal court sitting in Denver, Colorado, and hereby irrevocably agree that
any Action may be heard and determined in such Colorado State court or in such
Federal court. Borrower and all Sureties each hereby irrevocably waives, to the
fullest extent it may effectively do so, the defenses of lack of jurisdiction
over any person, inconvenient forum or improper venue, to the maintenance of any
Action in any jurisdiction.
18. Joint and Several Obligations. If there shall be more than one
maker of this Note, the obligations of each maker under this Note are joint and
several. The obligations of each maker are independent of the obligations of
each of the other makers or any guarantor who has executed and delivered a
guarantee. Release of one or more of the makers shall not impair or diminish the
liability of any remaining maker, except to the extent of monies actually
received by Bank from the released maker as a consequence of such release. Each
maker waives any rights the maker might otherwise have under C.R.S. Sections
13-50-102 or 13-50-103 (or under any corresponding future statute or rule of law
in any jurisdiction) by reason of any release of fewer than all of the makers,
all in such manner and upon such terms as the Bank may deem proper, and without
notice to or further assent from the makers, and all without affecting the
obligations of the makers hereunder. In the event of any default thereunder, a
separate action or actions may be brought and prosecuted against any of the
makers, whether or not a maker is joined therein or a separate action or actions
are brought against any of the other makers. Bank may maintain successive
actions for other defaults. The Bank's rights hereunder shall not be exhausted
by its exercise of any of its rights and remedies or by any such action or by
any number of successive actions until and unless the Obligations have been paid
and fully performed.
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19. Binding Effect. This Note shall be binding upon Borrower, each
Co-Maker and its successors and assigns and shall inure to the benefit of Bank,
and any subsequent holders of this Note, and their successors and assigns.
20. Notice. All notices required or permitted in connection with this
Note shall be given at the place and in the manner provided in the Line of
Credit Agreement for the giving of notices.
21. Attorneys' Fees. Borrower and Co-Makers further promise to pay all
reasonable attorneys' fees incurred by the Bank in connection with any Default
hereunder and in any proceeding brought to enforce any of the provisions of this
Note.
22. Interpretation and Incorporation. As used in this Note, the term
"Bank," shall include each subsequent transferee and/or owner of this Note,
whether taking by endorsement or otherwise. As used in this Note, the word
"include(s)" means "include(s), without limitation," and the word "including"
means "including, but not limited to."
23. Waiver of Jury Trial. Borrower and Co-Makers, and by acceptance of
this Note, Bank hereby irrevocably waive, to the fullest extent permitted by
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Note, the Line of Credit Agreement, the other Loan Documents
or the transactions contemplated thereby.
IN WITNESS WHEREOF, has duly executed this Note as of the day and year
first above written.
BORROWER:
ASSET INVESTORS OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: ASSET INVESTORS CORPORATION,
a Delaware corporation, General Partner
By: /s/David M. Becker
--------------------------------
David M. Becker
Chief Financial Officer
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CO-MAKERS:
COMMUNITY SAVANNA CLUB JOINT VENTURE, a
Delaware general partnership
By: AIOP FLORIDA PROPERTIES I, L.L.C.,
a Delaware limited liability company,
Managing General Partner
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS
CORPORATION, a Delaware
corporation, General Partner
By: /s/David M. Becker
------------------------------
David M. Becker
Chief Financial Officer
AIOP LOST DUTCHMAN NOTES, L.L.C., a Delaware
limited liability company
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS CORPORATION, a
Delaware corporation, General
Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
7
LINE OF CREDIT AGREEMENT
THIS LINE OF CREDIT AGREEMENT ("Agreement"), is made and entered into
as of the 7 day of April, 2000, by and between ASSET INVESTORS OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership ("Borrower"), AIOP FLORIDA
PROPERTIES I, L.L.C., a Delaware limited liability company, AIOP FLORIDA
PROPERTIES II, L.L.C., a Delaware limited liability company, COMMUNITY SAVANNA
CLUB JOINT VENTURE, a Delaware general partnership, and AIOP LOST DUTCHMAN
NOTES, L.L.C., a Delaware limited liability company, and U.S. BANK NATIONAL
ASSOCIATION (the "Bank").
RECITALS
. Borrower applied to the Bank for the extension of a line of credit
for general business purposes.
B. The Bank is willing to extend credit for such purposes upon the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1.
DEFINITIONS
The following terms when used in this Agreement shall, except where the
context otherwise required, have the following meanings (such definitions to be
equally applicable to the singular and the plural forms thereof):
1.1 "Act of Bankruptcy" shall mean (i) if Borrower or any member of the
Affiliate Group shall fail to pay its debts as they become due, or (ii) shall
make an assignment for the benefit of its creditors, or (iii) shall admit in
writing its inability to pay its debts as they become due, or (iv) shall file a
petition under any chapter of the Federal Bankruptcy Code or similar law, state
or federal, now or hereafter existing, or (v) shall become "insolvent" as that
term is generally defined under the Federal Bankruptcy Code, or (vi) shall in
any involuntary bankruptcy case commenced against it file an answer admitting
insolvency or inability to pay its debts as they become due, or (vii) shall fail
to obtain a dismissal of such case within ninety (90) days after its
commencement or convert the case from one chapter of the Federal Bankruptcy Code
to another chapter, or (viii) be the subject of an order for relief in such
bankruptcy case, or (ix) be adjudged a bankrupt or insolvent, or (x) shall have
a custodian, trustee or receiver appointed for, or have any court take
jurisdiction of its property, or any part thereof, in any voluntary proceeding
for the purpose of reorganization, arrangement, dissolution or liquidation and
such custodian trustee or receiver shall not be discharged, or such jurisdiction
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shall not be relinquished, vacated or stayed within (90) days of the
appointment.
1.2 "Advance" shall mean a disbursement under the Loan.
1.3 "Advance Request" shall mean the written request for Advances made
by Borrower and more particularly described in Section 2.4 below.
1.4 "Affiliate" shall mean any of the Affiliate Group and any Person
that directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such entities.
1.5 "Affiliate Group" shall mean Borrower; Asset Investors Corporation,
a Delaware corporation, Commercial Assets, Inc., a Delaware corporation, AIOP
FLORIDA PROPERTIES I, L.L.C., a Delaware limited liability company, AIOP FLORIDA
PROPERTIES II, L.L.C., a Delaware limited liability company, COMMUNITY SAVANNA
CLUB JOINT VENTURE, a Delaware general partnership, and AIOP LOST DUTCHMAN
NOTES, L.L.C., a Delaware limited liability company.
1.6 "Agreement" shall mean this Agreement as originally executed, as
amended, modified or supplemented from time to time.
1.7 "Appraisal" shall mean current appraisals of the Property prepared
by an appraiser, licensed by the state in which each Property is located,
engaged by and acceptable to Bank, which appraisal shall determine the market
value of the Property in its current as-is condition and shall comply with (1)
Title XI of the Federal Financial Institution Reform, Recovery and Enforcement
Act of 1989 (FIRREA); (2) the OCC Appraisal Standards of 12 CFR, part 34; and
(3) the Code of Professional Ethics and Standards of Professional Practice of
the American Institute of Real Estate Appraisers and the Guidelines for Real
Estate Appraisal Policies and Review Procedures adopted by the bank supervision
offices of the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision (OTS), Board of Governors of the Federal Reserve System and the
Office of the Comptroller of the Currency as of December 14, 1987 and shall be
in form and substance satisfactory to the Bank.
1.8 "Appraised Value" shall mean the value for a Property arrived at
under an Appraisal and accepted by the Bank.
1.9 "Approvals and Permits" means each and all approvals,
authorizations, bonds, consents, certificates, franchises, licenses, permits,
registrations, qualifications, and other actions and rights granted by or
filings with any Persons necessary, appropriate, or desirable in connection with
the Property, or for the conduct of the business and operations of Borrower.
1.10 "Authorized Officer" shall mean any one of the following Senior
Officers of Asset Investors Corporation, the sole general partner of the
Borrower, Chief Executive Officer, Vice Chairman, President, or Chief Financial
Officer or any other authorized agent of Borrower certified by Borrower to the
Bank for the purpose of making certifications under this Agreement or making
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Advance Requests. Until otherwise certified by Borrower to the Bank in writing,
the Authorized Officers of the general partner of the Borrower are Terry
Considine, Thomas L. Rhodes, Bruce E. Moore and David M. Becker.
1.11 "Business Day" shall mean every day except a Saturday, Sunday or
public holiday on which the Bank is required or permitted to be closed.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.13 "Closing Date" shall mean the date of recording of the Deed of
Trust on the Property.
1.14 "Collateral" shall mean any real property or personal property
(tangible or intangible), together with all improvements and appurtenances,
granted, pledged or encumbered to or for the benefit of the Bank in connection
with the Loan.
1.15 "Commitment Amount" shall mean Fifteen Million Dollars
($15,000,000.00), subject to the automatic reduction provisions of ARTICLE 9
below.
1.16 "Deed of Trust" shall mean a first lien deed or trust or mortgage,
security agreement, financing statement and assignment of rents and revenues,
creating a first lien on a Property, the improvements, and all rights and
easements appurtenant thereto, and assigning to the Bank all leases, contracts,
rents and revenues from the Property, if any, associated with the Property,
securing the Loan, all in form and substance customary for commercial loans made
by the Bank and satisfactory in all respects to the Bank, and intended to be
recorded in the real property records of the county in which the Property is
located, if required by the Bank.
1.17 "Default" shall mean any event which if continued uncured would,
with the passage of time or notice or both, constitute an Event of Default.
1.18 "Environmental Indemnity" shall mean the Environmental Indemnity
Agreement, executed by Borrower and each Property Subsidiary for the benefit of
Bank in connection with each Property, pursuant to which Borrower and each
Property Subsidiary agrees to indemnify, defend and hold harmless Bank from and
against environmental liabilities that Bank may incur relating to the Project.
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended, and the rules and
regulations promulgated thereunder by any governmental agency or authority, as
from time to time in effect.
1.20 "ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of trades or business under common
control of which Borrower is a member and which is treated as a single employer
under Section 414 of the Code.
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1.21 "Event of Default" shall mean any Event of Default described in
Section 7.1 below.
1.22 "Financing Statements" shall mean any and all UCC-1 Financing
Statements necessary to be filed or recorded in the official records of a
Governmental Entity to perfect the security interests of the Bank in Personalty
associated with a Property.
1.23 "GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in any other
statements by any other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of any
date of determination. Whenever any accounting term is used herein which is not
otherwise defined, it shall be interpreted in accordance with GAAP.
1.24 "Governmental Entity" shall mean any federal, state, or local
governmental or quasi-governmental entity, agency, board, commission or
organization having jurisdiction over any Collateral or Person relevant to this
Agreement.
1.25 "Governmental Requirement" shall mean all laws, ordinances, rules,
regulations, codes, orders, writs, legal requirements, injunctions or decrees of
any Governmental Entities applicable to the Borrower or any member of the
Affiliate Group or a Property.
1.26 "Indebtedness" shall mean all principal and interest and all other
sums payable under the Note and all other Loan Documents.
1.27 "Lien" shall mean any mortgage or deed of trust (including any
mortgage, pledge, hypothecation, assignment, deposit arrangement, lien or
charge), including the lien of the Loan Documents that becomes a lien on real
property, claim, security interest, easement or encumbrance, or preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the code or comparable law of any
jurisdiction), and any option, right of first refusal, or other interest or
right.
1.28 "Loan" shall mean the revolving line of credit commitment in the
maximum principal amount of $15,000,000.00 made available to the Borrower by the
Bank under the terms of this Agreement and the Loan Documents.
1.29 "Loan Documents" shall mean any and all documents evidencing and
securing the Loan and shall include the Note, this Agreement, any Deed of Trust,
any Financing Statement, any Security Agreement, any Environmental Indemnity
Agreement and any other documents or instruments now or hereafter executed and
delivered to the Bank to further evidence or secure the Loan.
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1.30 "Loan Party" shall mean Borrower, each Subsidiary and each other
Person that from time to time is or becomes obligated to the Bank with respect
to the Loan.
1.31 "Material Adverse Occurrence" shall mean any occurrence of
whatsoever nature (including, without limitation, any adverse determination in
any litigation, arbitration or governmental investigation or proceeding) which
in Bank's reasonable judgment materially adversely affects (i) the present or
prospective financial condition or operations of a Loan Party or a member of the
Affiliate Group or (ii) the ability of a Loan Party or a member of the Affiliate
Group to perform its obligations under the Loan Documents, including without
limitation, the occurrence of any event of dissolution or termination of any
Loan Party or a member of the Affiliate Group, or (iii) the operations or value
of the Property, and remains unsatisfied or is not discharged or eliminated
after thirty (30) days following written notice from the Bank.
1.32 "Maturity Date" shall mean the earlier of (i) May 31, 2001, unless
extended in accordance with Section 2.2 below or (ii) the date on which the Loan
is accelerated as a consequence of an Event of Default.
1.33 "Multiemployer Plan" shall mean a multiemployer plan, as that term
is defined in Section 4001(a)(3) of ERISA, which is maintained (on the Closing
Date, within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of any Borrower and/or any ERISA Affiliate.
1.34 "Note" shall mean the Revolving Promissory Note of even date
herewith in the stated amount of $15,000,000.00 made by Borrower and Property
Subsidiaries to the order of the Bank, as the same may be modified, amended,
extended, replaced or restated.
1.35 "Obligations" shall mean the Indebtedness and all other
obligations of the Borrower in connection with the Loan made by the Bank
pursuant to this Agreement.
1.36 "Opinions of Counsel" shall have the meaning set forth in Section
3.3(c) below.
1.37 "PBGC" shall mean the Pension Benefit Guaranty Corporation,
established pursuant to Subtitle A of Title IV of ERISA, and any successor
thereto or to the functions thereof.
1.38 "Person" shall mean any natural person, corporation, limited
liability company, limited partnership, limited liability partnership,
association, trust, joint venture, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.
1.39 "Personalty" shall mean all personal property, tangible and
intangible, contained within improvements or used in connection with a Property
financed by this Loan (excluding personal property owned by any tenant under a
lease) now owned or hereafter acquired by the Borrower, except personal property
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owned by Borrower and used in the maintenance and operation of multiple
properties.
1.40 "Plan" shall mean each employee benefit plan (whether in existence
on the Closing Date or thereafter instituted), as that term is defined in
Section 3 of ERISA, maintained for the benefit of employees, officers or
directors of Borrower and/or of any ERISA Affiliate.
1.41 "Prohibited Transaction" shall mean the respective meanings
assigned to that term in Section 4975 of the Code and Section 406 of ERISA.
1.42 "Property" shall mean any real property and appurtenances securing
this Loan, as more particularly described on Exhibit A.
1.43 "Property Subsidiary" shall mean either or both of Community
Savanna Club Joint Venture and AIOP Lost Dutchman Notes, L.L.C., as the context
requires.
1.44 "Reference Rate" shall mean the rate of interest announced by the
Bank from time to time as its Reference Rate. The Bank may lend to its customers
at rates which are at, above or below the Reference Rate.
1.45 "Reportable Event" shall mean a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such Section, with
respect to a Plan, excluding, however, the events as to which the PBGC by
regulation has waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event, provided that a failure
to meet the minimum funding standards of Section 412 of the Code and of Section
302 of ERISA shall be a Reportable Event regardless of the issuance of any
waivers in accordance with Section 412(d) of the Code.
1.46 "Security Agreement" shall mean any security agreement executed
and delivered by the Borrower and the Property Subsidiaries to the Bank,
granting to the Bank a security interest in Personalty associated with a
Property.
1.47 "Subsidiary" shall mean any or all of AIOP Florida Properties I,
L.L.C.; AIOP Florida Properties II, L.L.C.; Community Savanna Club Joint
Venture; and AIOP Lost Dutchman Notes, L.L.C., as the context requires, each of
which is 100% wholly owned, directly or through other Subsidiaries by Borrower.
1.48 "Title Company" shall mean the title insurance company, which
company shall be satisfactory to Bank in its absolute and sole discretion,
insuring a Deed of Trust associated with a Property.
1.49 "Title Policy" shall mean, respectively, each and all title
insurance policies and endorsements thereto and reinsurance or coinsurance
agreements and endorsements as reasonably required by the Bank in connection
with a Deed of Trust.
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Other terms defined herein shall have the meaning ascribed to them
herein.
ARTICLE 2.
CREDIT FACILITY
2.1 Commitment. Subject to and in accordance with the provisions of
this Agreement, the Bank agrees to make Advances of the Loan, and Borrower may
draw upon and borrow, in the manner and upon the terms and conditions expressed
in this Agreement, amounts that shall not exceed in the aggregate, at any one
time outstanding, the Commitment Amount. All amounts hereafter advanced or
accruing, including, without limitation, any amounts (including principal
amounts) advanced or outstanding hereunder in excess of the Commitment Amount,
shall be outstanding under the Loan and shall be evidenced and secured by the
Loan Documents. Borrower shall, within two (2) Business Days after written
notice from the Bank, make principal and other payments required so that the
outstanding principal balance of the Loan does not exceed the Commitment Amount.
The Loan shall be a revolving credit, against which Advances may be made to
Borrower, repaid by Borrower and additional Advances made to Borrower, subject
to the limitations contained in this Agreement, provided that Bank shall have no
obligation to make any Advance that would cause the outstanding principal
balance of the Loan to exceed the Commitment Amount.
2.2 Annual Review; Extension. The Bank shall be committed to make
Advances under this Loan prior to the Maturity Date. Upon written request by the
Borrower to the Bank delivered not more than ninety (90) days or less than sixty
(60) days prior to the then-effective Maturity Date, the Bank shall conduct a
credit review of the Loan. Following the first annual credit review,
approximately eleven (11) months after the date of this Agreement and on each
twelve-month anniversary thereafter, if the Borrower has requested an extension
of the Maturity Date in the manner set forth above and if the Bank determines to
extend the Maturity Date of the Loan, in its sole and absolute discretion, the
Maturity Date shall be extended by a period of twelve (12) months from the
then-effective Maturity Date. If, in the course of any annual review, the Bank
determines that it shall not extend the Maturity Date beyond its then-effective
date, the Bank shall give notice of such decision to Borrower not later than
thirty (30) days prior to the then-effective Maturity Date and, in such event,
the Bank shall continue to make Advances under the Loan until the Maturity Date.
2.3 The Loan.
(a) The Note. The Borrower's obligation to pay the principal of and
interest on the Loan shall be evidenced by the Note which shall (i) be duly
executed and delivered by Borrower and each Property Subsidiary, as co-makers,
(ii) be dated as of the date hereof, (iii) be in the stated principal amount of
the Loan, (iv) mature on the Maturity Date unless extended under the provisions
of Section 2.2, (v) bear interest as provided in the Note, and (vi) be entitled
to the benefits of this Agreement and the Loan Documents.
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(b) Term. The Loan shall have a term which commences as of the date
hereof and expires on the Maturity Date, unless extended in accordance with the
terms of Section 2.2 above.
(c) Interest and Payment. The Loan shall bear interest on the
outstanding principal balance at the Bank's floating Reference Rate, adjusted
daily. Interest shall be payable monthly on or before the first (1st) day of
each month. If not sooner paid, all outstanding principal, accrued but unpaid
interest and other charges due and owing under the Loan Documents shall be paid
in full on the Maturity Date.
(d) Default Rate; Late Charges. Upon the occurrence of a Default
under the Loan, the Bank shall have the right to collect interest on the
outstanding indebtedness under the Loan at a rate of interest equal to the
greater of (i) eighteen percent (18%) per annum or (ii) five percent (5%) per
annum in excess of the Reference Rate ("Default Rate"); provided that any
interest at the Default Rate which has accrued shall be paid at the time of and
as a condition precedent to the curing of any Default under the Loan. In the
event any payment of principal, interest, or other sum due in connection with
the Loan is not made within five (5) days after the due date, the Bank may, at
its option, require the payment of a late charge in the amount of four percent
(4%) of the delinquent sum ("Late Charge").
(e) Prepayment. Borrower shall have the right to prepay the Loan, in
whole or in part, at any time and from time to time. All sums received by the
Bank under this Loan from whatever source shall be applied (i) when no Default
or Event of Default has occurred and is continuing, for the specific purpose for
which it was remitted under the Loan and otherwise to the principal balance of
the Loan, and (ii) after the occurrence of a Default or Event of Default, and
while such Default or Event of Default continues, to fees, charges, interest or
principal under the Loan, in such manner and order as the Bank may direct, in
its sole and absolute discretion.
(f) Payments Due on Days Other than Business Days. Whenever any
payment to be made under this Agreement or under the Note shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day, and interest shall be payable at the
applicable rate during such extension.
2.4 Advances. Advances will be made by Bank daily upon receipt by Bank
of at least one (1) Business Day's advance written notice received on or before
10:00 a.m., Denver local time, accompanied by the items set forth below:
(a) an Advance Request in the form of Exhibit B.
(b) the certification by an Authorized Officer on behalf of
Borrower: (i) that neither a Default, except as specifically disclosed to Bank
in the Advance Request, or otherwise in writing, nor an Event of Default exists,
and (ii) that the outstanding principal balance of the Loan after the requested
Advance will not exceed the Commitment Amount.
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ARTICLE 3.
CONDITIONS PRECEDENT TO CLOSING
The Bank's obligation to make the Loan and to enter into and perform
its agreements under this Agreement shall be subject to the full and complete
satisfaction of the following conditions precedent, including receipt and
approval by the Bank of the following agreements, documents and instruments,
each in form and substance satisfactory to the Bank, in each case as determined
by the Bank in its sole and absolute discretion, on the Closing Date and
subsequently:
3.1 Representations and Warranties Accurate. The representations and
warranties by each Loan Party in the Loan Documents shall be correct on and as
of the Closing Date.
3.2 Documents. The Loan Documents described below shall be executed and
delivered to the Bank:
(a) this Agreement, duly executed by Bank, Borrower and each
Subsidiary;
(b) two Deeds of Trust, each duly executed by the appropriate
Property Subsidiary, encumbering each Property described on Exhibit A;
(c) the Note, duly executed by Borrower and each Property
Subsidiary, as co-maker;
(d) two Environmental Indemnity Agreements, each duly executed by
Borrower and the appropriate Property Subsidiary;
(e) the Security Agreement, duly executed by Borrower;
(f) UCC-1 financing statement(s) required to perfect the Bank's
security interest in the Personalty (the "Financing Statements"); and
(g) such other Collateral documents as Bank may reasonably require
to further evidence or perfect the Bank's security interests in the Collateral.
3.3 Review Items. The Bank shall have received and approved the
following:
(a) Resolutions. Resolutions of Borrower and each Subsidiary
authorizing the execution, delivery and performance of this Agreement and any
and all other documents related hereto or required hereby.
(b) Organizational Documents. Copies (certified to the Bank's
satisfaction) of the organizational documents of the Borrower and each
Subsidiary and current certificates of good standing issued by the appropriate
Governmental Entities.
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(c) Opinion of Counsel. Legal opinions ("Opinions of Counsel") of
independent counsel for Borrower and each Subsidiary with respect to this
Agreement and the Loan Documents, in form and substance satisfactory to the Bank
(i) that the Loan Party is duly organized and in good standing in the state of
its formation and in such other jurisdictions as may be necessary, (ii) that the
transaction described in the opinion and the execution and delivery of the
documentation evidencing such transaction and the performance of obligations
thereunder have been duly authorized by all necessary parties, (ii) that the
transaction documents are legal, valid and binding and enforceable in accordance
with their terms, subject to customary exceptions, (iii) concerning such other
legal matters as the Bank may require regarding the specific transaction and the
absence of conflicts with the governing documents of the entity or any other
agreement, instrument or governmental order or rule to which the entity is
subject and the absence of any material litigation against the entity which
would materially adversely affect the entity's ability to perform its legal
obligations under the transaction documents, and (iv) such other opinions
specific to the entity or the transaction as the Bank may reasonably require.
(d) Financial Statements. Certified financial statements of
Borrower, as specified in Section 5.1 below;
(e) Appraisal. A current Appraisal of the Property.
(f) Title Policy. The Bank shall have received a fully paid ALTA
mortgagee's Title Policy issued by a Title Company acceptable to the Bank, in
form and substance satisfactory to the Bank, naming the Bank as the insured and
insuring the Deed of Trust to be a valid first lien on a good and marketable fee
simple title to the Property, in an amount not less than the Commitment Amount,
subject only to such liens and encumbrances and such exceptions as are approved
in writing by the Bank, and, without limiting the generality of the foregoing,
specifically insuring against mechanics' liens, matters which would be disclosed
by a comprehensive survey, and the rights of parties in possession, and
containing judgment, tax lien, assessment and bankruptcy searches, a
comprehensive endorsement (if the Property is subject to prior restrictions of
record and in the judgment of the Bank, such an endorsement is necessary to
protect the Bank's interest), and such other endorsements as may reasonably be
requested by the Bank.
(g) Taxes. All delinquent taxes and all levied and pending
assessments relating to the Property shall have been paid in full (or, in lieu
thereof, payment in escrow of an amount determined by the Bank).
(h) Survey. Borrower shall have furnished to Bank, at Borrower's
expense, a current improvement survey plat ("survey"), in form and substance
satisfactory to the Bank and the Title Company, indicating, without limitation,
the legal description of the Property as it will be insured by the Title
Company, the courses and distances of the Property lot lines, all appurtenant
and servient easements, all dominant easements, location of nearest public roads
affording ingress and egress to and from the Property, location and dimensions
of all encroachments, buildings and other improvements (excluding manufactured
homes), locating all easements and rights-of-way appurtenant to or burdening the
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Property and showing any other matters of record, visible upon inspection of the
Property or otherwise known to the surveyor which affect title to or use of the
Property. The surveyor shall also certify whether or not any portion of the
Property is located within a Federal Emergency Management Agency identified
flood-prone area and if located thereon, state the map number and whether or not
the Property appears in the "Flood Hazard Area." The survey must be certified as
accurate by a licensed surveyor in the state in which each Property is located
and contain a certificate imprinted thereon in the form approved by the American
Land Title Association stating that the survey is made for the benefit of the
Bank and the Title Company and shall be sufficient to induce the Title Company
to deleted the standard exceptions from the Title Policy regarding matters that
would be shown by an ALTA survey. The survey for the Property located in Florida
shall meet the criteria set forth above or shall be otherwise satisfactory to
the Bank and sufficient to induce the Title Company to delete the standard
exceptions from the Title Policy regarding matters that would be shown by an
ALTA Survey.
(i) Hazardous Waste. The Bank shall have received evidence
(including, without limitation, a preliminary hazardous waste assessment or
report) acceptable to it in its sole discretion as to the presence of hazardous
waste or substances on, under or in the Property, together with such
documentation as may be necessary to permit the Bank to rely thereon, a copy of
which shall be provided to Borrower.
(j) Compliance with Governmental Requirements. The Bank shall have
received written evidence satisfactory to it that the Property and the use
thereof are permitted by and comply with all applicable restrictions and
requirements in prior conveyances, zoning ordinances, subdivision and platting
requirements and other laws and regulations, and have been duly approved by the
municipal or other governmental authorities having jurisdiction and that the
required building, zoning, environmental and other permits, approvals and
licenses have been duly obtained as required by law.
(k) Approvals. The Bank shall have received evidence acceptable to
it that the Borrower or appropriate Property Subsidiary has received all
necessary Approvals and Permits from, and given all necessary notices to, and
made all necessary filings with, any and all Governmental Entities with respect
to the Property, and the contemplated use and operation thereof.
(l) Insurance. The Bank shall have received the evidences of
insurance coverage required under Section 5.8 below.
(m) Soil Reports. If required by Bank, a soils report addressed to
Bank and prepared by a licensed soils engineer acceptable to Bank showing the
locations of, and containing boring logs for, all borings.
(n) Expenses. The Bank shall have been reimbursed by the Borrower
for all out-of-pocket costs and expenses incurred by the Bank to the date of
this Agreement in connection with the loan transactions contemplated herein,
including, without limitation, reasonable attorneys' fees, architect's fees,
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appraisal fees, survey fees, inspection fees, hazardous waste audits, closing
charges, documentary or tax stamps, recording and filing fees, and service
charges of the Bank. (This condition shall in no way limit the obligation of the
Borrower to reimburse the Bank for such costs and expenses paid or incurred by
the Bank during the term of the Loan.
ARTICLE 4.
REPRESENTATIONS, WARRANTIES AND COVENANTS
In order to induce Bank to make the Loan, Borrower, and, to the extent
applicable, each other Loan Party, for itself, represents, warrants and
covenants as follows, which representations, warranties and covenants shall be
true and correct as of the execution hereof and shall survive the execution and
delivery of the Loan Documents:
4.1 Organization of Loan Party; Authority to Enter into Agreement.
Borrower is a limited partnership, duly formed and validly in existence and in
good standing under the laws of the State of Delaware. Each Loan Party is duly
qualified to do business and is in good standing in each jurisdiction where the
nature of its business makes such qualification necessary and where the failure
to so qualify permanently precludes the Loan Party from enforcing its contracts.
Each Loan Party has full power and authority to enter into this Agreement, to
borrow money as contemplated herein and to execute and carry out the provisions
of the Loan Documents. The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary action of each Loan Party,
and no other action of the Loan Party is required for the execution, delivery
and performance of the Loan Documents. The Loan Documents which have been
executed and delivered pursuant to this Agreement constitute, or, if not yet
executed or delivered, will when so executed and delivered, constitute valid and
binding obligations of the Loan Party, each enforceable in accordance with its
respective terms. Each Loan Party holds all certificates of authority, licenses
and permits necessary to carry on its business as presently conducted in each
jurisdiction in which it is carrying on such business.
4.2 No Violation of Other Agreements; No Default. The execution,
delivery and performance by the Loan Party of the Loan Documents will not (a)
violate any provision of any Governmental Regulation or any order, writ,
judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to the Loan Party,
(b) violate or contravene any provision of the constituent documents of the Loan
Party, or (c) result in a breach of or constitute an event of default under any
indenture, deed of trust, mortgage, loan or credit agreement, note or, except as
specifically identified to the Bank in writing, any other agreement, lease or
instrument to which the Loan Party is a party or by which it or any of its
properties may be bound or result in the creation of any lien or security
interest thereunder. The Loan Party is not in default under or in violation of
any such Governmental Requirement, order, writ, judgment, injunction, decree,
determination or award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of such
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default or violation could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the Loan
Party.
4.3 Economic Benefit. The execution and delivery by Bank of this
Agreement and the extension of credit by the Bank hereunder constitutes an
economic benefit to each Loan Party at least equal to the amount of each of its
obligations hereunder and each Loan Party has received fair equivalent value by
the extension of the credit facility described in this Agreement in exchange for
the liens and security interest granted by the Loan Party to the Bank under the
Loan Documents.
4.4 Government Consents. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any Governmental Entity is required on the part of any Loan Party
to authorize, or is required in connection with the execution, delivery and
performance of, or the legality, validity, binding effect or enforceability of,
the Loan Documents, except for any necessary filing or recordation of or with
respect to any of the Loan Documents.
4.5 Good Faith; Bankruptcy. This Agreement and the Loan Documents are
executed in good faith by each Loan Party and is not given or intended to
hinder, delay or defraud any creditor or to contravene any of the bankruptcy
laws of the Federal Bankruptcy Code, United States (11 U.S.C. Section 101, et
seq.), or any other applicable laws. As of the date of the execution of this
Agreement, no Loan Party is the subject of a pending bankruptcy case. No Loan
Party is aware of any threatened bankruptcy case, nor is any Loan Party
presently intending to file such a case.
4.6 Affiliate Bankruptcy; Insolvency. No member of the Affiliate Group
is insolvent (as such term is defined in Section 101(29) of the Federal
Bankruptcy Code of 1978, as amended) and will not be rendered insolvent by
execution of this Agreement or any Loan Document or consummation of the
transactions contemplated thereby. No member of the Affiliate Group is the
subject of a case or proceeding under the Federal Bankruptcy Code or any state
insolvency statutes.
4.7 Solvency.
(a) The fair salable value of the assets of the Borrower will,
immediately following the closing of this Loan and after the transaction
contemplated under the Loan Documents exceed the amount that will be required to
be paid by or in respect of the existing debts and other liabilities of such
Borrower (including contingent liabilities) as they mature.
(b) The Borrower does not have or will not have, immediately
following the closing of the Loan, unreasonably small capital to carry out its
business as conducted or as proposed to be conducted.
(c) The Borrower does not intend to, or believe that it will, incur
debts beyond its ability to pay such debts as they mature.
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4.8 Financial Statements. Any loan applications, financial statements,
supporting schedules, and financial reports heretofore delivered to the Bank in
connection with the Loan Documents by or on behalf of each Loan Party are true
and correct in all material respects, and, as to each Loan Party, have been
prepared in accordance with GAAP, consistently applied, and fairly represent the
respective financial conditions of the subjects thereof as of the dates thereof
and for the periods covered thereby, and no Material Adverse Occurrence has
occurred in the financial conditions presented therein since the respective
dates thereof. Each Loan Party agrees to promptly notify Bank in the event that
any such documentation or information is later discovered by the Loan Party to
be materially inaccurate.
4.9 No Litigation. There are no material actions, suits or proceedings
pending, or to the knowledge of the Loan Party threatened against or affecting
the Loan Party, or any of the property or assets of the Loan Party, in any court
at law or in equity, or before or by any governmental or municipal authority
which might materially adversely affect the ability of the Loan Party to perform
its respective obligations hereunder or under any of the Loan Documents to which
the Loan Party is a party.
4.10 Marketable Title. Each Loan Party has good and marketable title to
all of its assets which secure repayment of the Note, free and clear of all
liens securing or evidencing a monetary obligation or containing provisions by
which title could be divested by an event of default or the passage of time.
4.11 Secondary Financing. There shall be no additional financing by the
Borrower or a Subsidiary which is secured by a lien on the Property without the
prior written consent of the Bank, which may be withheld in Bank's sole
discretion.
4.12 Compliance With Documents. As of the date hereof and for so long
as the Loan Documents remain in effect, each Loan Party is and will remain in
full compliance with all of the terms and conditions of this Agreement and the
Loan Documents, and no Default has or shall have occurred or shall have occurred
and be continuing, which, with the lapse of time or the giving of notice, or
both, would constitute an Event of Default under the foregoing.
4.13 Responsible Parties. Each Loan Party acknowledges and agrees that
the acts of the Authorized Officer are the acts of each Loan Party and that the
representations, warranties, covenants and agreements of each Loan Party in this
Agreement and the Loan Documents shall be deemed to be those of the other Loan
Parties.
4.14 Use of Proceeds. Each Advance will be used by the Borrower solely
for the general business purposes permitted under this Agreement.
4.15 Margin Stock. No part of the Advances shall be used at any time by
Borrower to purchase or carry margin stock (within the meaning of Regulation U
promulgated by the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any such margin stock. No part of the Advances will be used by Borrower
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for any purpose which violates, or which is inconsistent with, any regulations
promulgated by the Board of Governors of the Federal Reserve System.
4.16 Taxes. Each Loan Party has filed all federal, state and local tax
returns required to be filed and has paid or made provision (as required by
GAAP) for the payment of all taxes due and payable pursuant to such returns and
pursuant to any assessments made against it or any of its property and all other
taxes, fees and other charges imposed on it or any of its property by any
Governmental Entity (other than taxes, fees or charges the applicability, amount
or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of each Loan Party). No tax liens have been filed and no
material claims are being asserted with respect to any such taxes, fees or
charges. The charges, accruals and reserves on the books of each Loan Party in
respect of taxes and other governmental charges are adequate, and each Loan
Party knows of no proposed material tax assessment against it or any basis
therefor.
4.17 Trademarks, Patents. Borrower possesses or has the right to use
all of the patents, trademarks, trade names, service marks and copyrights, and
applications therefor, and all technology, know-how, processes, methods and
designs used in or necessary for the conduct of its business, without known
conflict with the rights of others.
4.18 Covenants, Zoning and Codes. Each Loan Party has complied and will
continue to comply with all applicable statutes and regulations to be complied
with in connection with the Property, including, without limitation, all
statutes and regulations regarding environmental issues, the Americans with
Disabilities Act, and historical preservation acts and regulations. All permits,
consents, approvals or authorizations by, or registrations, declarations,
withholding of objections or filings with any governmental body or private
entity necessary in connection with the valid execution, delivery and
performance of this Agreement, the Loan Documents, and any and all other
documents executed in connection with any of the foregoing, have been obtained
and are valid, adequate and in full force and effect. The Property and the
intended use thereof will in all material respects conform to and comply with
all covenants, conditions, restrictions and reservations affecting the Property,
with all applicable zoning, including parking requirements, subdivision,
environmental protection, use and building codes, laws, regulations and
ordinances, including without limitation any covenants and restrictions recorded
in the official records of the applicable Governmental Entity (collectively, the
"Covenants").
4.19 Accuracy of Information. All factual information heretofore or
herewith furnished by or on behalf of each Loan Party to the Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is, and all other such factual information hereafter furnished by or on behalf
of each Loan Party to the Bank will be, true and accurate in every material
respect on the date as of which such information is dated or certified and no
such information contains any misstatement of fact or omits to state any fact
necessary to make the statements contained therein not misleading.
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4.20 Representations and Warranties Upon Delivery of Financial
Statements, Documents and Other Information. Each delivery by a Loan Party to
Bank of financial statements, other documents, or information after the date of
this Agreement shall be a representation and warranty that such financial
statements, other documents, or information is correct and complete in all
material respects, that there are no omissions therefrom that result in such
financial statements, other documents, or information being incomplete,
incorrect, or misleading in any material respect as of the date thereof.
4.21 Survival of Representations. All representations, warranties and
covenants contained in this ARTICLE 4 shall survive the delivery of this
Agreement and the making of the Loan and each Advance contemplated hereunder and
any investigation at any time made by or on behalf of the Bank shall not
diminish its rights to rely on all of such representations and warranties.
4.22 Year 2000 Compliance. Borrower has reviewed and assessed its
business operations and computer systems and applications to address the "year
2000 problem" (that is, that computer applications and equipment used by
Borrower, directly or indirectly through third parties, may have been or may be
unable to properly perform date-sensitive functions before, during and after
January 1, 2000). Borrower represents and warrants that the year 2000 problem
has not resulted in and will not result in a material adverse change in
Borrower's business condition (financial or otherwise), operations, properties
or prospects or ability to repay Bank. Borrower agrees that this representation
and warranty will be true and correct on and shall be deemed made by Borrower on
each date Borrower requests any Advance under this Agreement or the Note or
delivers any information to Bank. Borrower will promptly deliver to Bank such
information relating to this representation and warranty as Bank requests from
time to time.
ARTICLE 5.
GENERAL COVENANTS
Each Loan Party agrees with the Bank that, so long as the Loan shall be
outstanding, unless the Bank shall otherwise consent in writing, each Loan Party
covenants and agrees as follows:
5.1 Financial Information. The Loan Parties will furnish to the Bank
copies of such of its financial statements, reports and information as may be
requested by the Bank, including, without limitation, the following financial
statements, reports and information, each of which shall be prepared on a
consolidated and consolidating basis for which no additional request shall be
required:
(a) As soon as available, and in any event within one hundred twenty
(120) calendar days after the end of each fiscal year of Borrower, a copy of its
audited annual financial reports, and, in any event within ninety (90) calendar
days after the end of each fiscal year of Asset Investors Corporation and
Commercial Assets, Inc., respectively, the Form 10K filing of both Asset
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Investors Corporation and Commercial Assets, Inc. with the Securities and
Exchange Commission;
(b) As soon as available, and in any event within seventy-five (75)
calendar days after the end of each fiscal quarter of Borrower, a copy of its
unaudited financial statement and, within forty-five (45) calendar days after
the end of each fiscal quarter of Asset Investors Corporation and Commercial
Assets, Inc., respectively, the Form 10Q filings of both Asset Investors
Corporation 10Q report and Commercial Assets, Inc. filed with the Securities and
Exchange Commission;
(c) Within ten (10) days after filing, a copy of any filing
available to the public made by Asset Investors Corporation or Commercial
Assets, Inc. with the Securities and Exchange Commission.
(d) As soon as available, and in any event within forty-five (45)
days after the end of each fiscal quarter, a compliance certificate ("Compliance
Certificate") signed by an Authorized Officer. Each Compliance Certificate shall
be in the form and substance satisfactory to the Bank, shall contain detailed
calculations of the financial covenants referred to in ARTICLE 6, and shall
contain statements by the Authorized Officer to the effect that, except as
explained in reasonable detail in such Compliance Certificate, (i) the attached
financial statements are complete and correct in all material respects (subject,
in the case of financial statements other than annual, to normal year-end audit
adjustments) and have been prepared in accordance with GAAP and applied
consistently throughout the periods covered thereby and with prior periods
(except as disclosed therein), (ii) all of the representations and warranties of
the Loan Parties contained in this Agreement and other Loan Documents are true
and correct as of the date of such certification is given as if made on such
date, and (iii) there is no Default or Event of Default. If any Compliance
Certificate delivered to the Bank discloses that a representation or warranty is
not true and correct, or that there is a Default or Event of Default, such
Compliance Certificate shall state what action Borrower has taken or proposes to
take with respect thereto.
5.2 Accounting System. Borrower and its Affiliate Group shall maintain
a system of accounting established and administered in accordance with GAAP.
5.3 Security Interests. Neither Borrower nor any Subsidiary shall
create, incur, assume or allow to exist any Liens upon all or any part of the
Collateral, now owned or hereafter acquired, except the following:
(a) Liens for taxes not delinquent or being diligently contested in
good faith and by appropriate proceedings and for which adequate reserves in
accordance with GAAP are maintained on Borrower's books.
(b) Liens imposed by any law, such as mechanics', workers',
materialmen's, landlords', carriers', or other like Liens arising in the
ordinary course of business which secure payment of obligations which are not
past due or which are being contested in good faith by appropriate proceedings
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and for which adequate reserves in accordance with GAAP are maintained on
Borrower's books.
(c) Liens securing the Obligations in favor of the Bank.
5.4 Transactions With Affiliates. Neither Borrower nor its Subsidiaries
shall enter into or be a party to any transactions or arrangement, including the
purchase, sale or exchange of property of any kind or the rendering of any
service, with any Affiliate, or make any loans or advance to any Affiliate
except as permitted under this Agreement. If there is no Default or Event of
Default, however, Borrower and its Subsidiaries may engage in such transactions
in the ordinary course of business and pursuant to the reasonable requirements
of its business and on fair and reasonable terms substantially as favorable to
it as those which it could obtain in a comparable arm's-length transaction with
a non-Affiliate.
5.5 Notices. Each Loan Party, each for itself, as soon as practicable,
shall give notice to the Bank of:
(a) The commencement of any uninsured litigation in excess of
$100,000.00 relating to any Loan Party or relating to the transactions
contemplated by this Agreement;
(b) The commencement of any material arbitration or governmental
investigation or proceeding not previously disclosed by the Loan Party to the
Bank in writing which has been instituted or, to the knowledge of the Loan
Party, threatened against any Loan Party or to which its properties or assets
are subject which, if determined adversely to the Loan Party would constitute a
Material Adverse Occurrence;
(c) Any adverse development which occurs in any litigation,
arbitration or governmental investigation or proceeding previously disclosed by
any Loan Party to the Bank which, if determined adversely to any Loan Party
would constitute a Material Adverse Occurrence;
(d) Any Event of Default under this Loan.
(e) The completion of the proposed merger between Asset Investors
Corporation and Commercial Assets, Inc., and a copy of the documentation
evidencing such merger and specifying the identity of the surviving corporation.
(f) Any notice of claimed default under any loans or credit
agreements executed by Borrower or any Loan Party pursuant to which Borrower or
any Loan Party has direct or contingent liability other than loans or credit
agreements which are non-recourse to Borrower or the Loan Party and are secured
by collateral other than the Bank's Collateral.
5.6 Books and Records, Periodic Audits. Borrower and each Subsidiary
shall maintain books and records reflecting all of its business affairs and
transactions in accordance with standard accounting practices reasonably
satisfactory to the Bank and permit the Bank, and its representatives and agents
at reasonable times and intervals and upon reasonable notice to the Borrower, to
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visit all of its offices, discuss its financial matters with the Authorized
Officers of the Borrower and its independent public accountants (and by this
provision the Borrower authorizes its independent public accountants to
participate in such discussions) and examine any of its books and other
corporate records.
5.7 Legal Existence. Borrower and each Subsidiary shall maintain its
legal existence in good standing under the laws of its jurisdiction of
organization and its qualification to transact business in each jurisdiction
where failure to qualify would permanently preclude the Borrower or the
Subsidiary from enforcing its rights with respect to any material asset or would
expose Borrower or the Subsidiary to any material liability.
5.8 Insurance. Borrower shall obtain and maintain the following
insurance and pay all related premiums as they become due:
(a) Casualty. Borrower shall maintain insurance on each Property
consisting of real or personal property against damage or loss by fire,
lightning, and other perils, on an all-risks basis, extended coverage basis,
without co-insurance, if applicable, without contribution from the insured, such
coverage to be in an amount reasonably satisfactory to the Bank. Such policy
shall or certificates for such insurance to be furnished hereunder shall be in
forms, companies and amounts satisfactory to Bank, with mortgagee clauses
attached to all policies or certificates in favor of and in form satisfactory to
Bank, including a provision requiring that the coverage evidenced thereby shall
not be cancelled, terminated or materially modified without thirty (30) days'
prior written notice to the Bank.
(b) Commercial General Liability. Borrower shall maintain commercial
general liability insurance protecting Borrower and Bank against loss or losses
from liability imposed by law or assumed in any agreement, document, or
instrument and arising from bodily injury, death, or property damage with a
limit of liability satisfactory to the Bank per occurrence and general aggregate
and "umbrella" excess liability insurance in an amount reasonably satisfactory
to the Bank. Such policies must be written on an occurrence basis so as to
provide blanket contractual liability, broad form property damage coverage, and
coverage for products and completed operations. In addition, there shall be
obtained and maintained business motor vehicle liability insurance protecting
each Borrower and Bank against loss or losses from liability relating to motor
vehicles owned, non-owned, or hired used by each Borrower, any contractor, any
subcontractor, or any other Person in any manner related to the business of the
Borrower with a limit of liability satisfactory to the Bank (combined single
limit for personal injury (including bodily injury and death and property
damage).
(c) Worker's Compensation. Borrower shall maintain or cause to be
maintained worker's compensation insurance, disability benefits insurance, and
such other forms of insurance as required by law covering loss resulting from
injury, sickness, disability, or death of employees of each Borrower, any
contractor, and any subcontractor located on or assigned to any property owned
or operated by any Loan Party. Borrower shall cause each contractor and each
subcontractor having employees located on or assigned to any business owned or
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operated by any Loan Party to obtain and maintain this same coverage for all
eligible employees.
(d) Other. All policies for required insurance shall be in form and
substance satisfactory to Bank in its reasonable discretion. Required insurance
may be provided under a blanket insurance policy. All required insurance shall
be procured and maintained in financially sound and generally recognized
responsible insurance companies selected by Borrower and approved by Bank. Such
companies must be authorized to write such insurance in the states in which the
Collateral is located. Each company shall be rated "A" or better and a financial
size category of VII, by A.M. Best Co., in Best's Key guide, or such other
rating acceptable to Bank in Bank's absolute and sole discretion. All property
policies evidencing required insurance shall name Bank as first mortgagee and
loss payee. All liability policies evidencing required insurance shall name Bank
as additional insured. Coverage under the policies for the benefit of the Bank
may not be limited due to the acts of Borrower. The policies shall provide for
at least thirty (30) days' prior written notice of the cancellation or
modification thereof to Bank.
(e) Evidence. A certificate of insurance evidencing that such
insurance is in full force and effect with respect to each Project shall be
delivered to Bank, together with proof of the payment of the premiums thereof,
or, at Bank's request, the original or a certified copy of each insurance
policy. Thirty (30) days prior to the expiration of each such policy, Borrower
shall furnish Bank evidence that such policy has been renewed or replaced in the
form of a certified copy of the renewal or replacement policy or, a certificate
reciting that there is in full force and effect, with a term covering at least
the next succeeding calendar years, insurance of the types and in the amount
required in this Section 5.8
5.9 Inconsistent Agreements. Neither Borrower nor any Subsidiary shall
enter into any agreement containing any provision which would be violated or
breached by the Borrower or Subsidiary in the performance of its obligations
under any Loan Document.
5.10 Compliance with Laws. Borrower and each Subsidiary shall carry on
its business activities and shall maintain the Property in substantial
compliance with all Governmental Regulations and all applicable rules,
regulations and orders of all Governmental Entities having power to regulate or
supervise its business activities or the Property.
5.11 Conduct of Business. Borrower and each Subsidiary shall maintain
and keep its assets, property and equipment in good repair, working order and
condition and from time to time make or cause to be made all needed renewals,
replacements and repairs.
5.12 Maintain Business. Borrower shall continue to engage primarily in
the business being conducted on the date of this Agreement.
5.13 Payment of Taxes and Claims. Borrower shall file or cause to be
filed all tax returns and reports which are required by law to be filed by it
and shall pay before they become delinquent all taxes, assessments and
governmental charges and levies imposed upon it or its property and all claims
or demands of any kind (including but not limited to those of suppliers,
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mechanics, carriers, warehouses, landlords and other like Persons) which, if
unpaid, might result in the creation of a Lien upon its property; provided that
the foregoing items need not be paid if they are being contested in good faith
by appropriate proceedings, and as long as the title of Borrower and the
Property Subsidiaries to its respective property is not materially adversely
affected, its use of such property in the ordinary course of its business is not
materially interfered with and adequate reserves with respect thereto have been
set aside on its books in accordance with GAAP.
5.14 Sales, Mergers, and other Fundamental Changes. Except as may be
permitted by the Bank in its sole and absolute discretion, Borrower and its
Subsidiaries shall not cause, suffer or permit, voluntarily or involuntarily,
(i) Borrower to enter into or offer or agree to any change in the legal or
beneficial ownership of Borrower, or (ii) Borrower or its Subsidiaries to enter
into or offer or agree to any change in the legal or beneficial ownership of
Subsidiary such that Borrower ceases to own, directly or through another
Subsidiary, one hundred percent (100%) of the legal and beneficial interests in
each Subsidiary. For purposes of this Agreement, "change in the legal or
beneficial ownership" shall include any transfer, sale, assignment, conveyance,
exchange, transfer in connection with a pledge or hypothecation or the
foreclosure of a pledge or hypothecation, transfer in connection with a grant of
rights or warrants or options or proxies with respect to such ownership
interests, merger, consolidation, reorganization, dissolution, liquidation or
winding up of such entity, creation of additional classes of stock or equity
interests, change in the rights associated with classes of preferred stock to
permit conversion to common or voting stock or to grant voting rights, or any
other act that would have the effect of altering or diminishing the legal or
beneficial ownership or any rights or duties with respect thereto.
Notwithstanding the foregoing, Borrower shall be entitled to changes in its
legal or beneficial ownership provided that no such changes shall impair or
diminish the voting and managerial control by Asset Investors Corporation of
Borrower.
5.15 Returned Payments. Each Loan Party agrees that, in the event any
payment made by or on behalf of any Loan Party respecting any Obligations, or
any portion any such payment, shall at any time be returned by the recipient
thereof for any reason, including pursuant to any order (whether or not final)
by a court of competent jurisdiction, any provision of the United States
Bankruptcy Code as now existing or hereafter amended, or any other applicable
federal or state law or because of acts or omissions of any Loan Party, the
Obligations shall not be deemed to have been satisfied to the extent of the
returned payment, and the obligations of each Loan Party shall be deemed to be
reinstated automatically and to continue in full force and effect.
5.16 Consolidation, Merger, Sale or Disposal of Assets. A Loan Party
shall not without the prior written approval from the Bank:
(a) acquire, consolidate or merge into or with any other entity
(other than the proposed merger between Asset Investors Corporation and
Commercial Assets, Inc.); or
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(b) sell, (other than sales of inventory in the ordinary course of
business) transfer, lease, or otherwise dispose of all, or substantially all, of
its assets during the term of this Agreement.
5.17 Indebtedness. Borrower shall not create, incur, assume, or allow
to exist any indebtedness of any kind or description, except the following:
(a) Indebtedness to trade creditors incurred in the ordinary course
of business, to the extent that it is not overdue past the original due date by
more than ninety (90) days or being contested in good faith by the Borrower with
the Bank's reasonable consent.
(b) The Indebtedness under the Loan.
(c) Indebtedness which is non-recourse to the Borrower or any Loan
Party and is secured by collateral other than the Bank's Collateral.
5.18 Platting. Bank acknowledges that Borrower is engaged in the
designing and platting of Phase V of the Savanna Club development which is the
Property located in Florida. Upon request by the Bank, Borrower shall provide
the Bank with copies of design documents and plats proposed for the Phase V,
prior to final approval by the applicable Governmental Entities.
5.19 Further Assurances. Borrower and each Subsidiary will at any time
and from time to time upon request of the Bank take or cause to be taken any
action, execute, acknowledge, deliver or record any further documents, opinions
or other instruments or obtain such additional insurance as Bank in its
discretion deems necessary or appropriate to carry out the purposes of this
Agreement.
ARTICLE 6.
FINANCIAL COVENANTS
6.1 Special Definitions. In this Article, the following terms shall
have the following meanings as to Borrower:
(a) "Free Cash Flow" shall mean Funds From Operations, plus Interest
Expense, less an annual capital replacement reserve of $50.00 per developed
homesite.
(b) "Capital Lease" shall mean any lease that has been or should be
capitalized under GAAP.
(c) "Funds From Operations" shall mean Net Income or loss,
calculated in accordance with GAAP (excluding gains and losses from debt
restructure and sales of property), plus real estate related depreciation and
amortization (excluding amortization of financing costs), and after adjustments
for unconsolidated partnerships and joint ventures, and including other
adjustments made by Borrower on a consistent basis.
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(d) "Indebtedness" shall mean, as to any Person at any particular
date, any contractual obligation enforceable against such Person (i) to repay
borrowed money; (ii) to pay the deferred purchase price of property or services;
(iii) to make payments or reimbursements with respect to letters of credit
whether or not there have been drawings thereunder; (iv) with respect to which
there is any security interest in any property of such Person; (v) to make any
payment or contribution to a Multi-Employer Plan; (vi) that is evidenced by a
note, bond, debenture or similar instrument; and (vii) under any conditional
sale agreement or title retention agreement.
(e) "Indirect Obligation" shall mean, as to any Person, (a) any
guaranty by such Person of any obligation of another Person; (b) any security
interest in any property of such Person that secures any obligation of another
person; (c) any enforceable contractual requirement that such person (i)
purchase an obligation of another Person or any property that is security for
such obligation; (ii) advance or contribute funds to another Person for the
payment of an obligation of such other Person or to maintain the working
capital, net worth or solvency of such other Person as required in any documents
evidencing an obligation of such other Person; (iii) purchase property,
securities or services from another person for the purpose of assuring the
beneficiary of any obligation of such other Person that such other Person has
the ability to timely pay or discharge such obligation; (iv) grant a security
interest in any property of such Person to secure any obligation of another
Person; or (v) otherwise assure or hold harmless the beneficiary of any
obligation of another Person against loss in respect thereof; and (d) any other
contractual requirement enforceable against such person that has the same
substantive effect as any of the foregoing. The term "Indirect Obligation" does
not, however, include the endorsement by a Person of instruments for deposit or
collection in the ordinary course of business or the liability of a general
partner of a partnership for obligations of such partnership. The amount of any
Indirect Obligation of a Person shall be deemed to be the stated or determinable
amount of the obligation in respect to which such Indirect Obligation is made
or, if not stated or determinable, the maximum reasonable anticipated liability
in respect thereof as determined by such Person in good faith.
(f) "Intangible Assets" means: (a) patents, copyrights, trademarks,
tradenames, franchise, license agreements, goodwill, and other similar
intangibles; (b) unamortized debt discount and expenses; and (c) fixed assets to
the extent of any write-up in the book value thereof resulting from a
revaluation effective after the date of this Loan Agreement.
(g) "Interest Expense" means, for any period of calculation, the
amount reported by Borrower in its financial statements, calculated in
accordance with GAAP.
(h) "Liabilities" shall have the meaning given that term in
accordance with GAAP.
(i) "Mandatory Debt Retirement and Interest" shall mean, at any date
of determination, the sum of all mandatory payments of principal and interest
(including payments due in connection with any Capital Lease) due during the
period of twelve (12) months from the date of determination; provided, however,
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that any amounts outstanding under the Loan and any "balloon" repayments due
within the 12-month period from the date of determination with respect to
Borrower's indebtedness which requires a lump-sum repayment of the balance of
the debt shall be deemed to have mandatory payments of principal and interest
equal to the principal and interest required to be paid during the 12-month
period if the outstanding principal balance of the Loan or the other debt were
fully amortized over a period of twenty (20) years from the date of
determination at an interest rate of eight percent (8%) per annum.
(j) "Minority Interests" shall mean the legal or beneficial
interests in any majority-owned subsidiaries of Borrower owned by Persons other
than Borrower.
(k) "Net Income" shall have the meaning given that term in
accordance with GAAP.
(l) "Tangible Net Worth" means as of any date, total assets of the
Borrower as determined in accordance with GAAP, minus the sum of (i) Liabilities
and (ii) Intangible Assets and (iii) Minority Interests.
6.2 Financial Covenants. As of the Closing Date and until the Loan and
all indebtedness hereunder has been paid in full and all Obligations hereunder
have been fully discharged, Borrower covenants and agrees as follows (each, a
"Financial Covenant"):
(a) Minimum Tangible Net Worth. The consolidated Tangible Net Worth
of Borrower shall not fall below $70,000,000.00, at any time.
(b) Ratio of Free Cash Flow to Interest Expense. The ratio of Free
Cash Flow of Borrower to Interest Expense of Borrower, in each case measured
over the prior four calendar quarters, shall not fall below 2.0 to 1, at any
time.
(c) Free Cash Flow Coverage. The ratio of Free Cash Flow of Borrower
to Mandatory Debt Retirement and Interest Payments of Borrower determined over
the prior four (4) quarters shall not fall below 1.5 to 1, at any time;
provided, however, that Free Cash Flow shall be adjusted to reflect acquisitions
and disposition of assets over the prior four (4) quarters.
6.3 Compliance Certificate. Within forty-five (45) days after the close
of each calendar quarter the Authorized Officer shall execute and deliver to
Bank a Compliance Certificate, in the form and substance satisfactory to the
Bank, confirming and certifying its continuing compliance with the financial
covenants set forth in this Section, as further described in Section 5.1 above.
ARTICLE 7.
DEFAULT AND REMEDIES
7.1 Event of Default. The occurrence of any of the following events
shall constitute an "Event of Default" hereunder:
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(a) Monetary. The Borrower shall default in the payment when due of
any Obligations owing to Bank under the terms of the Note and such failure to
make payment shall continue for a period of five (5) days or longer, except for
the payment in full of the Indebtedness on the Maturity Date, for which no grace
period is permitted.
(b) Covenant. A Default shall occur in the due performance and
observance of any of the covenants and conditions of this Agreement or the Loan
Documents, other than a monetary obligation, or an Event of Default specifically
set forth in this Section, which breach is not cured to Bank's satisfaction
within the applicable cure period for breach of such covenant or condition, and,
if no specific cure period is provided, within thirty (30) days of notice of
such Default being sent by the Bank to Borrower; provided, however, that if the
Default cannot by its nature reasonably be cured within thirty (30) days and
Borrower commences cure within thirty (30) days, Borrower shall be entitled to
an additional thirty (30) days to complete such cure.
(c) Financial Covenant. A breach by Borrower of the Financial
Covenant set forth in Section 6.2 shall occur which is not cured to the
satisfaction of the Bank within thirty (30) days after written notice from the
Bank of such Default.
(d) Representation and Warranties. Any written representation,
warranty or disclosure made by a Loan Party proves to be materially false or
misleading as of the date when made, whether or not such representation or
disclosure appears in this Agreement, the Loan Documents, or items submitted by
the Loan Party in connection therewith.
(e) Act of Bankruptcy. An Act of Bankruptcy shall occur.
(f) Material Adverse Occurrence. There occurs any Material Adverse
Occurrence.
Each Loan Party acknowledges and agrees that any Event of Default is
conclusively deemed to impair the security of the Loan Documents, and that Bank
shall be entitled to exercise any appropriate remedy, including without
limitation, foreclosure of any Deed of Trust or Security Agreement upon the
occurrence of any such Event of Default.
7.2 Remedies. Upon the occurrence of an Event of Default, Bank may, in
addition to any other remedies which Bank may have hereunder or under the Loan
Documents or by law, at its option and without prior demand or notice take any
or all of the following actions:
(a) Acceleration. Declare the Obligations under this Loan
immediately due and payable.
(b) Realization. Proceed to protect and enforce its rights and
remedies under the Loan Documents and avail itself of any other relief to which
the Bank may be legally or equitably entitled.
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(c) Compelled Return of Payments or Proceeds. If Bank is for any
reason compelled to surrender any payment or any proceeds of the Collateral
because such payment or the application of such proceeds is for any reason
invalidated, declared fraudulent, set aside, or determined to be void or
voidable as a preference, an impermissible setoff, or a diversion of trust
funds, then this Agreement, the Loan Documents and the Obligations to which such
payment or proceeds was applied or intended to be applied shall be revived as if
such application were never made; and Borrower shall be liable to pay to Bank,
and shall indemnify Bank for and hold Bank harmless from any loss with respect
to the amount of such payment or proceeds surrendered. This Section shall be
effective notwithstanding any contrary action Bank may take in reliance upon its
receipt of any such payment or proceeds. Any such contrary action so taken by
Bank shall be without prejudice to Bank's right under this Agreement and shall
be deemed to have been conditioned upon the application of such payment or
proceeds having become final and irrevocable. The provisions of this Section
shall survive the payment and satisfaction of all the Obligations.
(d) Right of Set-off. Upon the occurrence of any Event of Default
and at any time and from time to time thereafter, Bank is hereby authorized,
without notice to Borrower or any Subsidiary (any such notice being expressly
waived by Borrower and each Subsidiary), to set off and apply against the
Obligations any and all deposits (general or special, time or demand,
provisional or final) at any time held, or any other Indebtedness at any time
owing by Bank to or for the credit or the account of Borrower or any Subsidiary,
irrespective of whether or not Bank has made any demand under the Loan Documents
and although such Obligations may be unmatured, but subject to the rights of any
Person for whom the Borrower or the Subsidiary is holding funds as escrow agent.
The right of Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which Bank may
otherwise have.
(e) Entry Upon Premises and Access to Information. Upon the
occurrence of an Event of Default and acceleration of the Obligations as
provided herein, and at any time and from time to time thereafter, the Bank may
(i) enter any premises leased or owned by Borrower or a Subsidiary where any
Collateral is located (or believed to be located) without any obligation to pay
rent to Borrower or the Subsidiary, or any other place or places where any
Collateral is believed to be located, (ii) render Collateral usable or saleable,
(iii) move movable Collateral to the premises of the Bank or any agent of the
Bank for such time as the Bank may desire in order effectively to collect or
liquidate such Collateral; (iv) take possession of, and make copies and
abstracts of, the original books and records of Borrower and the Subsidiaries,
obtain access to the data processing equipment, computer hardware and software
relating to any of the Collateral and, subject to any proprietary rights of
third parties, use all of the foregoing and the information contained therein in
any manner the Bank deems appropriate in connection with the exercise of the
Bank's rights.
All remedies of Bank provided for herein and in any other Loan Document
are cumulative and shall be in addition to all other rights and remedies
provided by law. The exercise of any right or remedy by Bank hereunder shall not
in any way constitute a cure or waiver of default hereunder or under any other
Loan Document or invalidate any act done pursuant to any notice of default, or
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prejudice Bank in the exercise of any of its rights hereunder or under any other
Loan Documents unless, in the exercise of its rights, Bank realizes all amounts
owed to it under such Loan Documents.
7.3 Recertified Appraisal. If at any time (a) an Event of Default under
the Loan Documents has occurred, or (b) the Bank determines, in its sole
judgment, that the collateral position of the Bank in relation to the credit
extended for the benefit of the Borrower has adversely changed as a consequence
of material, physical or economic impairment of the Collateral, or (c) the Bank
is required by law or regulation to obtain a new Appraisal of the Properties, or
either of them, the Bank may require a new Appraisal of the Property in form and
content acceptable to the Bank to be prepared at Borrower's expense.
7.4 Limitation; Insolvency Laws. As used in this Section: (a) the term
"Applicable Insolvency Laws" means the laws of the United States of America or
of any state or other governmental unit relating to bankruptcy, reorganization,
arrangement, adjustment of debts, relief of debtors, dissolution, insolvency,
fraudulent transfers or conveyances or other similar laws (including, without
limitation, 11 U.S.C. ss. 548, ss. 550 and other "avoidance" provisions of Title
11 of the United States Code) as applicable in any proceeding in which the
validity and/or enforceability of the Loan Documents or any Specified Lien is in
issue; and (b) "Specified Lien" means any security interest, mortgage, lien or
encumbrance securing the Obligations, in whole or in part. Notwithstanding any
other provision of this Agreement, if, in any proceeding against Borrower and/or
a Subsidiary, a court of competent jurisdiction determines that the Obligations
or any Specified Lien would, but for the operation of this Section, be subject
to avoidance and/or recovery or be unenforceable against Borrower or the
Subsidiary by reason of Applicable Insolvency Laws, the Obligations and each
such Specified Lien shall be valid and enforceable only to the maximum extent
that would not cause the Obligations and such Specified Lien to be subject to
avoidance, recovery or unenforceability. To the extent that any payment to, or
realization by, the Bank on the Obligations exceeds the limitations of this
Section and is otherwise subject to avoidance and recovery in any such
proceeding, the amount subject to avoidance shall in all events be limited to
the amount by which such actual payment or realization exceeds such limitation,
and the Obligations as limited shall in all events remain in full force and
effect and be fully enforceable against the Borrower and each Subsidiary. This
Section is intended solely to reserve the rights of the Bank hereunder against
Borrower and each Subsidiary in such proceedings to the maximum extent permitted
by Applicable Insolvency Laws and none of the Borrower nor any Subsidiary nor
any Person shall have any right, claim or defense under this Section that would
not otherwise be available under Applicable Insolvency Laws in such proceedings.
If the Obligations or any Specified Lien are subject to avoidance or recovery,
or are unenforceable, with respect to Borrower or any Subsidiary by reason of
Applicable Insolvency Laws, or if the validity and enforceability of the
Obligations or any Specified Lien are limited with respect to Borrower or any
Subsidiary pursuant to this Section 7.3, such avoidance, recovery,
unenforceability or limitation shall not affect the validity or enforceability
of the Obligations or any Specified Lien with respect to any other Subsidiary.
27
<PAGE>
ARTICLE 8.
RELATIONSHIP AMONG LOAN PARTIES
8.1 Joint and Several Liability. BY SIGNING THIS AGREEMENT, BORROWER
AND EACH OF THE SUBSIDIARIES AGREE THAT IT IS LIABLE, JOINTLY AND SEVERALLY WITH
EACH OTHER LOAN PARTY, FOR THE PAYMENT OF THE NOTE AND ALL OTHER OBLIGATIONS OF
THE BORROWER UNDER THIS AGREEMENT, AND THAT BANK CAN ENFORCE SUCH OBLIGATIONS
AGAINST ANY OF BORROWER OR EACH SUBSIDIARY, IN BANK'S SOLE AND UNLIMITED
DISCRETION.
8.2 Bank's Right to Administer Credit. Bank may at any time and from
time to time, without the consent of, or notice to, Borrower or Subsidiary,
without incurring responsibility to Borrower or Subsidiary, and without
affecting, impairing or releasing any of the obligations of Borrower hereunder:
(a) pursuant to the exercise of its rights and remedies under the
terms of the Loan Documents, sell, exchange, surrender, realize upon, release
(with or without consideration) or otherwise deal with in any manner and in any
order any property of any person or entity mortgaged to Bank or otherwise
securing the Borrower's and Subsidiaries' joint and several liability, or
otherwise providing recourse to Bank with respect thereto;
(b) exercise or refrain from exercising any rights against Borrower
or any Subsidiary or others with respect to the Borrower's or Subsidiaries'
joint and several liability, or otherwise act or refrain from acting;
(c) settle or compromise any of the Borrower's or Subsidiaries'
joint and several liability, any security therefor or other recourse with
respect thereto, or subordinate the payment or performance of all or any part
thereof to the payment of any liability (whether due or not) of Borrower or any
Subsidiary to any creditor of Borrower or any Subsidiary, as applicable,
including without limitation, Bank and Borrower or any Subsidiary;
(d) apply any sums received by Bank from any source in respect of
any liabilities of Borrower or any Subsidiary to Bank to any of such
liabilities, regardless of whether the Note remains unpaid;
(e) fail to set off and/or release, in whole or in part, any balance
of any account or any credit on its books in favor of Borrower or any
Subsidiary, or of any other person, and extend credit in any manner whatsoever
to Borrower or any Subsidiary, and generally deal with Borrower or any
Subsidiary and any security for the Borrower's or Subsidiaries' joint and
several liability of any recourse with respect thereto as Bank may see fit;
and/or
(f) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any other Loan Document, including, without
limitation, any agreement providing collateral security for the payment of the
28
<PAGE>
Borrower's and Subsidiaries' joint and several liability or any other
indebtedness of any Borrower to Bank.
8.3 Primary Obligation. No invalidity, irregularity or unenforceability
of all or any part of Borrower's or Subsidiaries' joint and several liability or
of any security therefor or other recourse with respect thereto shall affect,
impair or be a defense to any other Loan Party's joint and several liability,
and all obligations under the Note and this Agreement are primary obligations of
Borrower and each Subsidiary.
8.4 Payments Recovered From Bank. Notwithstanding any other term or
provision hereof, if claim is ever made upon Bank for repayment or recovery of
any amount or amounts received by Bank from Borrower, Subsidiary or any other
person or entity and applied in payment of or on account of any of the
Borrower's or Subsidiaries' joint and several liability and Bank is required to
repay all or any part of said amount or amounts by reason of (i) judgment,
decree or order of any court of administrative body having jurisdiction over
Bank or any of its property, or (ii) any settlement or compromise of any such
claim effected by Bank with any such claimant (including Borrower or
Subsidiary), then and in such event such judgment, decree, order, settlement or
compromise shall be binding upon Borrower and each Subsidiary and Borrower and
each Subsidiary shall be and remain liable to Bank hereunder for the amount so
repaid or recovered to the same extent as if such amount had never been received
by Bank.
8.5 No Release. Until the Note and all other obligations under this
Agreement have been paid in full and each and every one of the covenants and
agreements of this Agreement are fully performed, the obligations of Borrower
and each Subsidiary hereunder shall not be released, in whole or in part, by any
action or thing which might, but for this provision of this Agreement, be deemed
a legal or equitable discharge of a surety or Subsidiary, or by reason of any
waiver, extension, modification, forbearance or delay or other act or omission
of Bank or its failure to proceed promptly or otherwise, or by reason of any
action taken or omitted by Bank whether or not such action or failure to act
varies or increases the risk of, or affects the rights or remedies of Borrower
or Subsidiary, nor shall any modification of any of the Note or this Agreement
or release of any security therefor by operation law or by the action of any
third party affect in any way the obligations of Borrower or Subsidiary
hereunder, and Borrower or each Subsidiary hereby expressly waives and
surrenders any defense to its liability hereunder based upon any of the
foregoing acts, omissions, things, agreements or waivers of any of them, it
being the purpose and intent of the parties hereto that the Borrower's or
Subsidiaries' joint and several liability constitute the direct and primary
obligations of Borrower and each Subsidiary and that the covenants, agreements
and all obligations of Borrower and each Subsidiary hereunder be absolute,
unconditional and irrevocable.
8.6 No Marshalling. Borrower and each Subsidiary hereby waives any and
all right to cause a marshalling of any other Loan Party's assets or any other
action by any court or other governmental body with respect thereto insofar as
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<PAGE>
the rights of Bank hereunder are concerned or to cause Bank to proceed against
any security for the Loan Party's joint and several liability or any other
recourse which Bank may have with respect thereto, and further waives any and
all requirements that Bank institute any action or proceeding at law or in
equity against any other Loan Party or anyone else, or with respect to this
Agreement, the Loan Documents, or any collateral security for the Borrower's or
Subsidiaries' joint and several liability, as a condition precedent to making a
demand on, or bringing an action or obtaining and/or enforcing a judgment
against Borrower or any Subsidiary. Borrower and each Subsidiary further waives
any requirement that Bank seek performance by any other Loan Party or any other
person, of any obligation under this Agreement, the Loan Documents or any
collateral security for the Borrower's or Subsidiaries' joint and several
liability as a condition precedent to making a demand on, or bringing any action
or obtaining and/or enforcing a judgment against, Borrower or any Subsidiary.
Neither Borrower nor any Subsidiary shall have any right of setoff against Bank
with respect to any of its obligations hereunder. Any remedy or right hereby
granted which shall be found to be unenforceable as to any person or under any
circumstance, for any reason, shall in no way limit or prevent the enforcement
of such remedy or right as to any person or circumstance, nor shall such
unenforceability limit or prevent enforcement of any other remedy or right
hereby granted.
8.7 Deficiencies. Borrower and each Subsidiary specifically agrees that
in the event of a foreclosure under any security agreement or other similar
agreement held by Bank which secures any part or all of the Borrower's and
Subsidiaries' joint and several liability and in the event of a deficiency
resulting therefrom, Borrower and each Subsidiary shall be, and hereby is
expressly made, liable to Bank for the full amount of such deficiency
notwithstanding any other provision of this Agreement or provision of such
agreement, any document or documents evidencing the indebtedness secured by such
agreement or any other document or any provision of applicable law which might
otherwise prevent Bank from enforcing and/or collecting such deficiency.
Borrower and each Subsidiary hereby waives any right to notice of a foreclosure
under any security agreement or other similar agreement given to Bank by any
other Loan Party which secures any part or all of the Loan Parties' joint and
several liability.
8.8 Bankruptcy. Borrower and each Subsidiary expressly agrees that its
liability and obligations under the Note and this Agreement shall not in any way
be affected by the institution by or against any other Loan Party or any other
person or entity of any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or any other similar proceedings for relief under any
bankruptcy law or similar law for the relief of debtors, or any action taken or
not taken by Bank in connection therewith, and that any discharge of Borrower's
or Subsidiaries' joint and several liability pursuant to any such bankruptcy or
similar law or other law shall not discharge or otherwise affect in any way the
obligations of any other Loan Party under the Note, the Guarantee and this
Agreement, and that upon or at any time after the institution of any of the
above actions, at Bank's sole discretion, the Borrower's and Subsidiaries' joint
and several obligations shall be enforceable against Borrower or any Subsidiary
that is not itself the subject of such proceedings. Borrower and each Subsidiary
expressly waives any right to argue that Bank's enforcement of any remedies
against Borrower or that Subsidiary is stayed by reason of the pendency of any
such proceeding against any other Loan Party.
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ARTICLE 9.
RELEASES AND SUBSTITUTIONS
Borrower may sell either of the Property located in Florida ("Florida
Property") or the Property located in Arizona ("Arizona Property") pursuant to a
purchase contract and releases under the applicable Deed of Trust shall be
executed and delivered by the Bank for the Property so sold, upon the terms and
conditions set forth in this Article. In connection with such a sale, Borrower
may propose substitute collateral for the Florida Property or the Arizona
Property so sold, upon the terms and conditions set forth in this Article.
9.1 Release Procedure. The Bank's obligation to permit the release of
the lien of the Deed of Trust encumbering either the Florida Property or the
Arizona Property (either, a "Release Property") shall be contingent upon all of
the following: (i) no Event of Default shall have occurred and be continuing,
(ii) payment to the Bank of the release Price (defined below), (iii) payment of
any and all expenses, including reasonable attorneys' fees in respect of such
release incurred by the Bank, costs of recording releases, and incidental
release fees charged by the Bank, in connection with such release, (iv) the
Release Property shall be the entire Florida Property or the entire Arizona
Property, and (v) the Commitment Amount shall automatically be reduced to an
amount equal to the portion of the Commitment Amount allocated to the remaining
Property after release of the Release Property, except and to the extent that
the Borrower and the Bank agree to a substitution of Collateral on the terms
provided herein
9.2 Release Price. For the release of the Release Property, Borrower
shall pay to the Bank an amount (the "Release Price"), calculated as follows: an
amount equal to the quotient of the Allocated Amount for the Release Property as
described on Exhibit C ("Allocated Amount") divided by the Commitment Amount,
multiplied by the Advances outstanding under the Loan as of the date of release
of the Release Property (e.g.: $10,800,000 (Allocated Amount for Arizona
Property) divided by $15,000,000 (Commitment Amount) = .72 x $9,200,000 (assumed
amount of Advances) = $6,624,000 Release Price).
9.3 General Provisions Regarding Releases. With respect to each request
for release and payment of the Release Price:
(a) Not later than five (5) Business Days prior to closing of the
sale of a Release Property, Borrower shall provide to the Bank the
fully-prepared request for partial release, together with the items described in
this Article 9 which are conditions precedent to the Bank's obligation to grant
such release (other than payment of the Release Price and other costs and
expenses).
(b) Every payment of Release Price shall be credited first to costs
then due and unpaid with respect to the Loan, second to accrued interest due
under the Loan with respect to the Release Price, and, third, to the principal
balance of the Loan.
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(c) The Commitment Amount shall automatically be reduced by an
amount equal to the Allocated Amount for the Release Property, except and to the
extent the Borrower and the Bank agree to a simultaneous substitution of
Collateral.
(d) Any payment of Release Price shall not release Borrower from the
payment of the Note according to its terms and conditions, and no such payment
shall in any way impair or affect the validity, priority or standing of the Deed
of Trust as to the remainder of the Property encumbered by a Deed of Trust.
9.4 Substitution of Collateral. In connection with the request for
release of a Release Property, the Borrower may also request that the Bank
accept substitute collateral for the Release Property in order to avoid the
reduction of the Commitment Amount by the Allocated Amount attributable to the
Release Parcel. The Bank shall have no obligation to accept the offered
substitute collateral and any acceptance by the Bank of substitute collateral
shall be in the Bank's sole and absolute discretion and upon such terms and
conditions satisfactory to the Bank, including without limitation the Allocated
Amount attributable to such substitute collateral. In order to permit the Bank
to review and evaluate such substitute collateral, the Borrower shall, not less
than sixty (60) days prior to Borrower's request for release of the Release
Property, provide to the Bank such due diligence items and information as may be
requested by the Bank. In the event the Bank shall determine to accept such
substitute collateral, Borrower shall execute and deliver to the Bank such
amendments to this Agreement and the Loan Documents and additional documents and
instruments and due diligence items in the nature of items described in Article
3 as the Bank may request.
ARTICLE 10.
MISCELLANEOUS
10.1 No Waiver. No waiver of any default or breach by a Loan Party
hereunder shall be implied from any failure by Bank to take action on account of
such default if such default persists or is repeated, and an express waiver
shall not affect any default other than the default specified in the waiver and
shall be operative only for the time and to the extent therein stated. Waivers
of any covenant, term or condition contained herein shall not be construed as a
waiver of any subsequent breach of the same covenant, term or condition. The
consent or approval by Bank to, or of, any act by a Loan Party requiring further
consent or approval shall not be deemed to waive or render unnecessary the
consent or approval to, or of, any subsequent similar act.
10.2 Successors and Assigns. This Agreement is made and entered into
for the sole protection and benefit of Bank and the Loan Parties, their
successors and assigns, and no other person or persons shall have any right of
action hereunder. The terms hereof shall be binding upon and shall inure to the
benefit of the parties hereto and the personal representatives, executors,
successors and assigns of the parties hereto; provided, however, that the
interests of a Loan Party hereunder cannot be assigned or otherwise transferred
without the prior consent of Bank.
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10.3 Subrogation of Bank. Bank shall be subrogated to the lien of any
previous encumbrance discharged with funds advanced by Bank under the Loan
Documents, regardless of whether such previous encumbrance has been released of
record.
10.4 Notices. Any notice required or permitted to be given by Borrower
or Bank under this Agreement shall be in writing and will be deemed given (a)
upon personal delivery or upon confirmed transmission by telecopier or similar
facsimile transmission device, (b) on the first business day after receipted
delivery to a courier service which guarantees next-business-day delivery, or
(c) on the third business day after mailing, by registered or certified United
States mail, postage prepaid, in any case to the appropriate party at its
address set forth below:
If to Borrower or a Subsidiary:
Asset Investors Operating Partnership, L.P.
c/o Asset Investors Corporation
3410 S. Galena Street, Suite 210
Denver, CO 80231
Attn: Chief Financial Officer
Telecopy No.: 303-614-9401
With Copy to:
Joseph Gaynor, Esq.
Brandywine Real Estate Management Services
Corporation
2637 McCormick Drive
Clearwater, Florida 33759-1041
Telecopy No.: 727-791-7920
If to Bank:
U. S Bank National Association
918 17th Street, Fifth Floor
Denver, Colorado 80202
Attention: Cyd D. Petre, Vice President
Telecopy #: (303) 585-4198
33
<PAGE>
With a copy to:
Gorsuch Kirgis LLP
Tower I, Suite 1000
1515 Arapahoe Street
Denver, Colorado 80202
Attention: Connie B. Hyde, Esq.
Telecopy #: (303) 376-5001
10.5 Authority to File Notices. Borrower and each Subsidiary
irrevocably appoint, designate and authorize Bank as its agent (said agency
being coupled with an interest) to send to any third party any other notice or
documents or take any other action that Bank deems necessary or desirable to
protect its interest hereunder, or under the Loan Documents, and will upon
request by Bank, execute such additional documents as Bank may require to
further evidence the grant of the aforesaid right to Bank.
10.6 Time. Time is of the essence hereof.
10.7 Amendments, etc. No amendment, modification, termination or waiver
of any provisions of this Agreement or of any of the Loan Documents nor consent
to any departure by Borrower or a Subsidiary therefrom shall in any event be
effective unless the same shall be in writing and signed by Bank, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
10.8 Headings. The article and section headings in no way define,
limit, extend or interpret the scope of this Agreement or of any particular
article or section.
10.9 Number and Gender. When the context in which the words are used in
this Agreement indicate that such is the intent, words in the singular number
shall include the plural and vice-versa. References to any one gender shall also
include the other gender if applicable under the circumstances.
10.10 No Joint Venture; No Third Party Beneficiary. The Bank, on the
one hand, and the Loan Parties, on the other, each have separate and independent
rights and obligations under this Agreement. Nothing contained herein shall be
construed as creating, forming or constituting any partnership, joint venture,
merger or consolidation of the Loan Parties and the Bank for any purpose or in
any respect. Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than the parties hereto and their respective
successors and assigns any rights and remedies under or by reason of this
Agreement.
10.11 Governing Law; Venue. THIS AGREEMENT AND THE LOAN DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO (WITHOUT GIVING EFFECT TO COLORADO'S PRINCIPLES OF
34
<PAGE>
CONFLICTS OF LAW), EXCEPT TO THE EXTENT (A) OF PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING ONLY TO THE CREATION, PERFECTION, FORECLOSURE AND ENFORCEMENT
OF RIGHTS AND REMEDIES AGAINST SPECIFIC COLLATERAL, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED (THE
"COLLATERAL STATE"), AND (B) THAT THE LAWS OF THE UNITED STATES OF AMERICA AND
ANY RULES REGULATIONS, OR ORDERS ISSUED OR PROMULGATED THEREUNDER, APPLICABLE TO
THE AFFAIRS AND TRANSACTIONS ENTERED INTO BY THE BANK, OTHERWISE PREEMPT
COLLATERAL STATE LAW OR COLORADO LAW; IN WHICH EVENT SUCH FEDERAL LAW SHALL
CONTROL. BORROWER, EACH SUBSIDIARY, HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY COLORADO OR FEDERAL COURT SITTING IN DENVER,
COLORADO (OR ANY STATE IN WHICH THE PROPERTY IS LOCATED) OVER ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS.
10.12 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and of the Loan Documents and the extension of the Loan hereunder and
continue in full force and effect until the Obligations of Borrower hereunder
evidenced by the Note have been fully paid and satisfied.
10.13 Automatic Acceleration. Should there occur an Event of Default
which would, with the giving of notice, the passage of time, or both, constitute
an Event of Default hereunder and if a petition under the United States
Bankruptcy Code thereafter is filed by or against Borrower or any Subsidiary
while such event remains uncured, all obligations hereunder shall be
automatically accelerated and due and payable and the Default Rate of interest
provided for in the Note shall automatically apply as of the date of the first
occurrence of the event which would, with the giving of notice, the passage of
time, or both, constitute an Event of Default, without any notice, demand or
action of any type on the part of Bank (including any action evidencing the
acceleration or imposition of the default rate of interest). The fact that the
Bank has, prior to the filing of the voluntary petition under the United States
Bankruptcy Code, acted in a manner which is inconsistent with the acceleration
and imposition of the default rate of interest provided for in the Note, shall
not constitute a waiver of this Section 9.13 or estop Bank from asserting or
enforcing Bank's rights hereunder.
10.14 Costs and Expenses. The Loan Parties shall reimburse Bank for all
reasonable attorneys' fees and expenses incurred by Bank in connection with
negotiation, preparation, approval, review, execution, delivery, amendment, and
modification of the Loan and the enforcement of Bank's rights under this
Agreement and each of the other Loan Documents, including, without limitation,
reasonable attorneys' fees and reimbursements for trial, appellate proceedings,
out-of-court workouts and settlements and for enforcement of rights under any
state or federal statute, including, without limitation, reasonable attorneys'
fees incurred in bankruptcy and insolvency proceedings such as in connection
with seeking relief from stay in a bankruptcy proceeding or negotiating and
documenting any amendment or modification of the Loan or reviewing subsequent
submission items pertaining to the Loan. The Loan Parties shall pay all costs
35
<PAGE>
incurred by the Bank in negotiation, preparation, approval, review, execution,
delivery, amendment, and modification of the Loan and the enforcing payment and
performance of the Loan, exercising rights and remedies of Bank under the Loan
Documents, or reviewing submission items pertaining to the Loan. The Loan
Parties' reimbursement obligation shall be part of the indebtedness evidenced by
the Loan Documents.
10.15 Severability; Titles. If any provision of this Agreement or of
any other Loan Document executed in connection with this Agreement is, for any
reason and to any extent, invalid or unenforceable, then neither the remainder
of the Loan Document in which such provision is contained, or the application of
the provision to other persons, entities or circumstances, nor any other
document referred to in this Agreement, shall be affected by such invalidity or
unenforceability, and there shall be deemed substituted for the invalid or
unenforceable provision the most similar provision which would be valid and
enforceable under applicable law.
10.16 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute the
same document.
10.17 Participations. Bank, at any time, shall have the right to sell,
assign, transfer, negotiate or grant participation interests in the Loan and in
any documents and instruments executed in connection therewith. Each Loan Party
acknowledges and agrees that any such disposition shall give rise to a direct
obligation of Borrower to each such participant, so long as any enforcement
action shall be taken jointly among such participants. Bank is authorized to
furnish to any participant or prospective participant any information or
document that Bank may have or obtain regarding the Loan or the Loan Parties.
10.18 Waiver of Rights. In order to avoid delays in time and any
prejudice that may arise from trial by jury and in light of the complexities of
this transaction, in the event of litigation arising out of or relating to this
Loan Agreement, the Note and/or the other Loan Documents, and/or in any way
connected with or related or incidental to the dealings of the parties hereto or
any of them with respect to this Loan Agreement, the other Loan Documents and/or
any other instrument, document or agreement executed or delivered in connection
herewith, or the transaction related hereto or thereto, in each case, whether
sounding in contract, tort or otherwise, Bank, Borrower and each Subsidiary,
with the prior advice of counsel, knowingly, intelligently and as a bargained
for matter, waives its right to trial by jury and agree and consent that any
claim, demand, action or cause of action in respect to such litigation shall be
decided by a trial to the court without a jury.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement as of the day and year first above written.
BANK:
U.S. BANK NATIONAL ASSOCIATION
By: /s/Cyd Petre
-----------------------
Cyd Petre, Vice President
BORROWER:
ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership
By: ASSET INVESTORS CORPORATION,
a Delaware corporation,
General Partner
By: /s/David M. Becker
----------------------
David M. Becker
Chief Financial Officer
SUBSIDIARIES:
AIOP FLORIDA PROPERTIES I, L.L.C., a
Delaware limited liability
company
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS CORPORATION,
a Delaware corporation, General
Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
37
<PAGE>
AIOP FLORIDA PROPERTIES II, L.L.C., a
Delaware limited liability company
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS CORPORATION,
a Delaware corporation, General
Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
COMMUNITY SAVANNA CLUB JOINT VENTURE, a
Delaware general partnership
By: AIOP FLORIDA PROPERTIES I, L.L.C.,
a Delaware limited liability company,
Managing General Partner
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS CORPORATION,
a Delaware corporation, General
Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
38
<PAGE>
AIOP LOST DUTCHMAN NOTES, L.L.C., a
Delaware limited liability company
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS CORPORATION,
a Delaware corporation, General
Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
39
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of April,
2000, by Cyd Petre as Vice President of U. S. BANK NATIONAL ASSOCIATION.
Witness my hand and official seal.
My Commission Expires: 12/7/2000
/s/Pam J. Finch
-------------------------
Notary Public
[ S E A L ]
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership.
Witness my hand and official seal.
My commission expires: 12/7/3000
/s/Pam J. Finch
-------------------------
Notary Public
( S E A L )
40
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Florida Properties I, L.L.C., a Delaware limited liability
company.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-------------------------
Notary Public
( S E A L )
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Florida Properties II, L.L.C., a Delaware limited liability
company.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-------------------------
Notary Public
( S E A L )
41
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Florida Properties I, L.L.C., as Managing General Partner of
Community Savanna Club Joint Venture, a Delaware general partnership.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-------------------------
Notary Public
( S E A L )
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Lost Dutchman Notes, L.L.C., a Delaware limited liability
company.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-------------------------
Notary Public
( S E A L )
42
After Recording Return to:
GORSUCH KIRGIS LLP
Tower I, Suite 1000
1515 Arapahoe Street
Denver, Colorado 80202
Attention: Connie B. Hyde, Esq.
DEED OF TRUST, SECURITY AGREEMENT,
FINANCING STATEMENT AND
ASSIGNMENT OF RENTS AND REVENUES
[Arizona]
THIS DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, AND
ASSIGNMENT OF RENTS AND REVENUES (this "Deed of Trust") is given as of the 7th
day of April, 2000 by the Trustor named below to the Trustee named below, for
the use and benefit of the Beneficiary named below.
ARTICLE 1
PARTIES, PROPERTY, AND DEFINITIONS
The following terms and references shall have the meanings indicated:
1.1 Trustor: AIOP Lost Dutchman Notes, L.L.C., a Delaware limited
liability company, whose mailing address is 3410 South Galena Street, Suite 210,
Denver, Colorado 80231, together with any future owner of the Property or any
part thereof or interest therein.
1.2 Beneficiary: U.S. BANK NATIONAL ASSOCIATION, whose mailing address
is 918 Seventeenth Street, Fifth Floor, Denver, Colorado 80202, together with
any legal holder of the Note.
1.3 Trustee: Stewart Title & Trust of Phoenix, Inc., a Delaware
corporation, whose mailing address is 244 West Osborn Road, Phoenix, Arizona
85013.
1.4 Note: The Revolving Promissory Note of even date herewith, executed
by Trustor, Asset Investors Operating Partnership, L.P., a Delaware limited
partnership ("Operating Partnership") and Community Savanna Club Joint Venture
("Joint Venture") payable to the order of Beneficiary in the principal face
amount of $15,000,000.00, together with all renewals, extensions, and
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modifications of the Note. All terms and provisions of the Note are incorporated
by this reference in this Deed of Trust.
1.5 Loan Agreement: The Line of Credit Agreement of even date herewith
executed by Trustor, Operating Partnership, Joint Venture, AIOP Florida
Properties I, L.L.C., a Delaware limited liability company, AIOP Florida
Properties II, L.L.C., a Delaware limited liability company, and the
Beneficiary, and all renewals, extensions, modifications and amendments thereof.
All capitalized terms not otherwise defined herein shall bear the meaning given
to them in the Loan Agreement.
1.6 Real Property: The real property described in Exhibit A, attached
hereto and by this reference incorporated herein, together with all right, title
and interest of Trustor in the following with respect to the real property,
whether now owned or hereafter acquired by Trustor:
(a) All improvements now or hereafter located on such real property
(excluding manufactured homes and setup owned by third parties) and all
easements and appurtenances thereto;
(b) The land lying within any street or roadway adjoining the real
property; any vacated or hereafter vacated street or alley adjoining the real
property; and any strips and gores adjoining the real property;
(c) All and singular the passages, waters, water rights (whether
tributary or non-tributary or not non-tributary), water courses, riparian
rights, wells, well permits, water stock, other rights, liberties and privileges
thereof or in any way now or hereafter appertaining to the real property,
including homestead and any other claim at law or in equity, as well as any
after-acquired title, franchise or license, and the reversion and reversions and
remainder and remainders thereof;
(d) All machinery, apparatus, equipment, fittings, fixtures
(whether actually or constructively attached or incorporated, and including all
trade, domestic, and ornamental fixtures, but excluding manufactured homes and
setups owned by third parties) now or hereafter located in, upon, or under such
real property or improvements and used or usable in connection with any present
or future operation thereof, including but not limited to all lighting, utility,
and power equipment; engines; pipes; pumps; tanks; motors; conduits; utility
systems, plumbing, lifting, cleaning, fire prevention, fire extinguishing,
signage, heating, air-conditioning; communication apparatus; water heaters;
ranges; furnaces; appliances, refrigerators, stoves; shades, awnings, screens,
storm doors and windows; attached cabinets; rugs, carpets and draperies and all
additions thereto and replacements therefor;
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1.7 Tangible Personalty: All right, titles and interests of the Trustor
in and to the following, with respect to the Real Property:
(a) All goods, trade fixtures, fixtures, inventory, furnishings,
fittings, machinery, apparatus, equipment, building and other construction
materials, supplies, and other tangible personal property of every nature now
owned or hereafter acquired by Trustor and used, intended for use, or reasonably
required in the development, construction, reconstruction, alteration, repair,
or operation of the Property and any improvements or infrastructure located
thereon, together with all accessions thereto, replacements and substitutions
therefor, and proceeds thereof, including, without limitation, to the extent not
deemed to be real property under this Deed of Trust, all apparatus, machinery,
motors, elevators, fittings, equipment, and other furnishings and all plumbing,
heating, lighting, cooking, laundry, ventilating, refrigerating, incinerating,
air-conditioning and sprinkler equipment and fixtures, all clubhouse and
swimming pool equipment, lockers, lifeguard equipment, lawn or deck chairs,
towels, swimming pool cleaning and maintenance equipment, recreational and
fitness equipment, including but not limited to rowing machines, stationery
bikes, nautilus equipment and appurtenances thereto.
1.8 Intangible Personalty: All right, title and interest of the Trustor
in and to the following, with respect to the Real Property:
(a) all of the rents, royalties, income (including, without
limitation, operating income), receipts, revenues, issues, and profits of and
from the use, operation, or enjoyment of such real property and improvements
(collectively, the "Income"), whether such Income is attributable to the period,
or is collected, prior to or subsequent to any default by Trustor and all causes
of action associated with the collection of such Income;
(b) all plans and specifications for the improvements on the real
property; soil, environmental, engineering, land planning maps, surveys and
other studies and reports concerning the real property or prepared for the
orderly planning and development of the real property, including all plans,
drawings and studies concerning the platting or replatting of the real property;
all contracts and subcontracts relating to the improvements on the real
property, or any thereof;
(c) all of Trustor's rights and prerogatives arising in connection
with or by virtue of Trustor's ownership of lots in the real property including,
without limitation, the right to vote as a member of any lot owners' association
and all rights arising under any declaration described in Exhibit B and under
the articles of incorporation and bylaws of such association;
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(d) all awards and payments, including interest thereon, resulting
from the exercise of any right of eminent domain or any other public or private
taking of, casualty or injury to, or decrease in the value of, any of such real
property, including without limitation all property insurance payments, proceeds
and policies related to such real property;
(e) all of the licenses, permits, franchises, and other
entitlements to use and all rights thereto which have been issued by or which
are pending before any governmental or quasi-governmental agency which are
necessary or appropriate for the Property;
(f) all accounts, accounts receivable, deposit accounts, escrow
accounts, monies, claims, causes of action, rights to payment, prepaid insurance
an d other prepaid items, contracts, contract rights, refunds and rebates,
maintenance contracts, maintenance warranties, continuing agreements, down
payment deposits, general intangibles associated with the Property and insurance
proceeds;
(g) all water taps, sewer taps, building permits, curb cut permits,
storm water discharge permits, refunds, rebates or deposits due or to become due
from any utility companies or Governmental Entity;
(h) the absolute right to Trustor's interest in any trade name used
by Trustor in connection with the Property and all of Trustor's rights in and to
contract rights, leases, concessions, trade names, trademarks, service marks,
logos, operating systems, trade secrets, technology and technical information,
copyrights, warranties, licenses, plans, drawings and other items of intangible
personal property relating to the ownership or operation of the Property; and
(i) all other and greater rights and interests of every nature in
such property and in the possession or use thereof and income therefrom, whether
now owned or subsequently acquired by Trustor.
1.9 Property: The Real Property, the Tangible Personalty and the
Intangible Personalty are sometimes collectively called the "Property." It is
specifically understood that the enumeration of any specific articles of the
Property, including Tangible Personalty and Intangible Personalty shall in no
way exclude or be held to exclude any items of property not specifically
mentioned. All of the Real Property, Tangible Personalty and Intangible
Personalty, whether affixed or annexed or not, and all rights hereby conveyed
and mortgaged are intended to be as a unit and are hereby understood and agreed
and declared to be appropriated to the use of the real estate, and shall for the
purposes of this Deed of Trust be deemed to be real estate and conveyed and
mortgaged hereby.
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Any capitalized terms not otherwise defined in Sections 1.6 through 1.9 of this
Deed of Trust and not defined in the Loan Agreement shall bear the meaning given
to them in Arizona Revised Statutes ("A.R.S.") Sections 47-1101 through
47-11107, as amended from time to time (the "Arizona Uniform Commercial Code").
1.10 The Secured Obligations: The Property is granted and shall be held
for the purpose of securing the following (the "Secured Obligations"):
(a) The payment of the indebtedness as evidenced in the Note;
(b) The performance and observance of all terms, covenants,
conditions, and provisions to be performed or observed by the Trustor pursuant
to the terms of:
(i) this Deed of Trust,
(ii) the Security Agreement executed by Trustor in connection
with the Project,
(iii) the Financing Statements on the Project,
(iv) the Loan Agreement,
(v) any and all pledge or other security agreements, loan
agreements, disbursement agreements, supplemental agreements, assignments (both
present and collateral), side letters, as the same may be amended, modified or
supplemented from time to time, being referred to hereinafter as "Related
Agreements" associated with the Project.
(c) The payment of all sums expended or advanced by Beneficiary
pursuant to the terms hereof.
(d) The payment and performance of all Obligations under the Loan
Agreement and any Loan Documents executed in connection therewith.
(e) The payment of all future advances under the Note and Loan
Agreement, made pursuant to the terms of the Note, Loan Agreement and other Loan
Documents.
The Note, this Deed of Trust, the Security Agreement, Financing Statements,
Related Agreements, Loan Agreement and any and all other documents or
instruments executed in connection with the foregoing to evidence or secure the
Note, specifically excluding, however, the Environmental Indemnity Agreement,
shall be hereinafter collectively called the "Loan Documents".
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ARTICLE 2
GRANTING CLAUSE
2.1 Grant to Trustee. As security for the Secured Obligations, Trustor
hereby grants, bargains, sells, and conveys the Property to Trustee, in trust
forever, with power of sale, for the use and benefit of Beneficiary, and subject
to all provisions hereof.
2.2 Security Interest to Beneficiary. As additional security for the
Secured Obligations, Trustor hereby grants to Beneficiary a security interest in
the Tangible Personalty and in the Intangible Personalty and in such of the Real
Property as may be deemed personalty (collectively, the "Collateral"). To the
extent any of the Collateral may be or has been acquired with funds advanced by
Beneficiary under the Loan Documents, this security interest is a purchase money
security interest. This Deed of Trust constitutes a Security Agreement under the
Arizona Uniform Commercial Code (the "Code") with respect to any part of the
Property and Collateral that may or might now or hereafter be or be deemed to be
personal property, fixtures or property other than real estate; all of the
terms, provisions, conditions and agreements contained in this Deed of Trust
pertain and apply to the Collateral as fully and to the same extent as to any
other property comprising the Property, and the following provisions of this
section shall not limit the generality or applicability of any other provision
of this Deed of Trust but shall be in addition thereto:
(a) The Collateral is not used or bought for personal, family or
household purposes;
(b) The Tangible Personalty shall be kept at the real estate
comprising a part of the Property, and shall not be removed therefrom (unless
contemporaneously replaced with similar items of equal or greater value) without
the consent of Beneficiary and the Tangible Personalty may be affixed to such
real estate but shall not be affixed to any other real estate;
(c) No financing statement covering any of the Collateral or any
proceeds thereof is on file in any public office; and Trustor will, at its cost
and expense, upon demand, furnish to Beneficiary such further information and
will execute and deliver to Beneficiary such financing statements and other
documents in form reasonably satisfactory to Beneficiary and will do all such
acts and things as Beneficiary may at any time or from time to time reasonably
request or as may be reasonably necessary or appropriate to establish and
maintain a perfected security interest in the Collateral as security for the
Secured Obligations, subject to no adverse liens or encumbrances; and Trustor
will pay the cost of filing the same or filing or recording such financing
statements or other documents and this instrument in all public offices wherever
filing or recording is deemed by Beneficiary to be reasonably necessary or
desirable;
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(d) The terms and provisions contained in this section and in
Section 7.5 (Enforcement of Security Interests) of this Deed of Trust shall,
unless the context otherwise requires, have the meanings and be construed as
provided in the Code; and
(e) This Deed of Trust constitutes a security agreement and
financing statement under the Code with respect to the Collateral. As such, this
Deed of Trust covers all items of the Collateral that are personal property
including all items which are to become fixtures. Trustor is the "Debtor" and
Beneficiary is the "Secured Party" (as those terms are defined and used in the
Code) insofar as this Deed of Trust constitutes a financing statement.
(f) Upon its recording in the real property records, this Deed of
Trust shall be effective as a financing statement filed as a fixture filing. In
addition, a carbon, photographic or other reproduced copy of this Deed of Trust
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement. The filing of any other financing
statement relating to any personal property, rights or interests described
herein shall not be construed to diminish any right or priority hereunder.
ARTICLE 3
TRUSTOR'S TITLE AND AUTHORITY
3.1 Warranty of Title. Trustor represents and warrants to Beneficiary
that Trustor has good and marketable title to the Property in fee simple
absolute, subject only to the lien of general taxes for the current year,
payable the following year, and those additional matters, if any, set forth in
Exhibit B, attached hereto and by this reference incorporated herein ("Permitted
Exceptions"). Trustor further represents and warrants to Beneficiary that
Trustor is the absolute owner of the Collateral, free of any liens,
encumbrances, security interests, and other claims whatsoever, except insofar as
the Collateral may be encumbered by the lien of general taxes for the current
year, payable the following year. Trustor, for itself and its successors and
assigns, hereby agrees to warrant and forever defend, all and singular, all of
the Property and property interest granted and conveyed in trust pursuant to
this Deed of Trust, against every person whomsoever lawfully claiming, or to
claim, the same or any part thereof, subject to the Permitted Exceptions. The
warranties contained in this section shall survive foreclosure of this Deed of
Trust, and shall inure to the benefit of and be enforceable by any person who
may acquire title to the Property or the Collateral pursuant to any such
foreclosure.
3.2 Waiver of Homestead and Other Exemptions. To the extent permitted
by law, Trustor hereby waives all rights to any homestead or other exemption to
which Trustor would otherwise be entitled under any present or future
constitutional, statutory, or other provision of applicable state or federal
law.
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3.3 Due Authorization. If Trustor is other than a natural person, then
each individual who executes this document on behalf of Trustor represents and
warrants to Beneficiary that such execution has been duly authorized by all
necessary corporate, partnership, or other action on the part of Trustor.
ARTICLE 4
TRUSTOR'S AFFIRMATIVE COVENANTS
4.1 Payment of Note. Trustor will pay all principal, interest, and
other sums payable under the Note, the Loan Agreement or this Deed of Trust or
the Loan Documents, on the date when such payments are due, without notice or
demand.
4.2 Performance of Other Obligations. Trustor will, in all material
respects, perform and comply with all other covenants, conditions, and
prohibitions required of Trustor by the terms of the Loan Documents.
4.3 Other Encumbrances. Trustor will, in all material respects, perform
and comply with all covenants, conditions, and prohibitions required of Trustor
in connection with any other encumbrance affecting the Property or the
Collateral, or any part thereof, or any interest therein, regardless of whether
such other encumbrance is superior or subordinate to the lien hereof. This
paragraph does not authorize any lien or encumbrance against the Property or the
Collateral except as permitted by Section 3.1 or with the prior written consent
of the Beneficiary as provided in this Deed of Trust.
4.4 Payment of Taxes.
(a) Property Taxes. Trustor will pay, before delinquency, all taxes
and assessments, including without limitation, general, special and metropolitan
district taxes, water charges, sewer service charges (collectively, the
"Impositions"), which may be levied or imposed at any time against Trustor's
interest and estate in the Property or the Collateral. Within ten days after
request by Beneficiary, Trustor will deliver to Beneficiary an official receipt
for such payment or other evidence that such payment has been made.
(b) Deposit for Taxes. If required by the Beneficiary, concurrently
with the delivery of this Deed of Trust, Trustor has deposited with Beneficiary
an amount equal to 1/12th of the amount which Beneficiary estimates will be
required to make the next annual payment of Impositions, multiplied by the
number of whole and partial months which have elapsed since March 31 of the
current year. With each monthly payment under the Note, Trustor will deposit
with Beneficiary an amount equal to 1/12th of the amount which Beneficiary
estimates will be required to pay the next required installment or payment of
Impositions. The purpose of these provisions is to provide Beneficiary with
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sufficient funds on hand to pay all such Imposition charges 30 days before the
date on which they become past due. Provided no default exists hereunder,
Beneficiary will apply the amounts so deposited to the payment of such
Imposition when due, but in no event will Beneficiary be liable for any interest
on any amount so deposited, and the money so received may be held and commingled
with Beneficiary's own funds. If the funds so deposited are insufficient to the
Impositions for any year when the same shall become due and payable, the Trustor
shall, within ten (10) days after receipt of demand therefor, deposit such
additional funds as may be necessary to pay such Impositions in full.
(c) Intangible Taxes. If by reason of any statutory or
constitutional amendment or judicial decision adopted or rendered after the date
hereof, any tax, assessment, or similar charge is imposed against the Note,
against Beneficiary arising directly from Beneficiary's interests in the Loan
Documents (other than a tax based on Beneficiary's income), or against any
security interest of Beneficiary in the Property, Trustor will pay such tax,
assessment, or other charge before delinquency and will indemnify Beneficiary
against all loss, expense, or diminution of income in connection therewith. In
the event Trustor is unable to do so, either for economic reasons or because the
legal provisions or decisions creating such tax, assessment or charge forbid
Trustor from doing so, then the Note will, at Beneficiary's option, become due
and payable in full upon 30 days' notice to Trustor.
(d) Right to Contest. Notwithstanding any other provision of this
section, Trustor will not be deemed to be in default solely by reason of
Trustor's failure to pay any Impositions so long as, in Beneficiary's reasonable
judgment, each of the following conditions is satisfied:
(i) Trustor is engaged in and diligently pursuing in good faith
administrative or judicial proceedings appropriate to contest the validity or
amount of such Impositions; and:
(ii) Nonpayment of such Impositions will not result in the loss
or forfeiture of any Property encumbered hereby or any interest of Beneficiary
therein.
If Beneficiary reasonably determines that any one or more of such conditions is
not satisfied or is no longer satisfied, Trustor will pay the Impositions in
question, together with any interest and penalties thereon, within ten days
after Beneficiary gives notice of such determination.
4.5 Maintenance of Insurance. Trustor shall provide and maintain
policies of insurance on the Property in accordance with the Loan Agreement.
(a) Deposit for Premiums. If required by Beneficiary, concurrently
with the delivery of this Deed of Trust, Trustor has deposited with Beneficiary
an amount equal to 1/12th of the amount which Beneficiary estimates will be
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required to make the next annual payments of the premium for the policies of
insurance referred to in this section, multiplied by the number of whole and
partial months which have elapsed since the most recent policy anniversary date
for each such policy ("Insurance Premium"). With each monthly payment under the
Note, Trustor will deposit an amount equal to 1/12th of the amount which
Beneficiary estimates will be required to pay the next required annual premium
for each insurance policy referred to in this section. The purpose of these
provisions is to provide Beneficiary with sufficient funds on hand to pay all
such Insurance Premiums thirty (30) days before the date on which they become
past due. Trustor shall, within ten (10) days after receipt of demand therefor,
deposit such additional funds as are necessary to make up any deficiencies in
amounts necessary to pay such Insurance Premiums when due. Provided no default
exists hereunder, Beneficiary will apply the amounts so deposited to the payment
of such Insurance Premiums when due, but in no event will Beneficiary be liable
for any interest on any amount so deposited, and the money so received may be
held and commingled with Beneficiary's own funds.
(b) Renewal Policies. Not less than thirty (30) days prior to the
expiration date of each insurance policy required pursuant to the Loan
Agreement, Trustor will deliver to Beneficiary a copy of an appropriate renewal
policy certified by Trustor as complete and accurate, together with evidence
reasonably satisfactory to Beneficiary that the applicable premium has been
prepaid.
(c) Successor's Rights. Any person who acquires title to the
Property or the Collateral upon foreclosure hereunder will succeed to all of
Trustor's rights under all policies of insurance maintained pursuant to this
section, including, without limitation, all rights to all claims under all such
insurance policies regardless of the nature of such claim or when such claim
arose.
4.6 Damages; Insurance and Condemnation Proceeds.
(a) The following (whether now existing or hereafter arising) are
all absolutely and irrevocably assigned by Trustor to Beneficiary and, at the
request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards of
damages and all other compensation payable directly or indirectly by reason of a
condemnation or proposed condemnation for public or private use affecting all or
any part of, or any interest in, the Property; (ii) all other claims and awards
for damages to, or decrease in value of, all or any part of, or any interest in,
the Property; (iii) all proceeds of any insurance policies payable by reason of
loss sustained to all or any part of the Property; and (iv) all interest which
may accrue on any of the foregoing. Subject to applicable law, and without
regard to any requirement contained in Section 4.8(d) Beneficiary may at its
discretion apply all or any of the proceeds it receives to its expenses in
settling, prosecuting or defending any claim and may apply the balance to the
Secured Obligations in any order, and/or Beneficiary may release all or any part
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of the proceeds to Trustor upon any conditions Beneficiary may impose.
Beneficiary may commence, appear in, defend or prosecute any assigned claim or
action and may adjust, compromise, settle and collect all claims and awards
assigned to Beneficiary; provided, however, in no event shall Beneficiary be
responsible for any failure to collect any claim or award, unless such failure
is due to the gross negligence of Beneficiary.
(b) So long as no Default exists and is continuing, Beneficiary may
permit insurance or condemnation proceeds held by Beneficiary to be used for
repair or restoration but may condition such application upon reasonable
conditions, including, without limitation: (i) the deposit with Beneficiary of
such additional funds which Beneficiary determines are needed to pay all costs
of the repair or restoration, (including, without limitation, taxes, financing
charges, insurance and rent during the repair period); (ii) the establishment of
an arrangement for lien releases and disbursement of funds acceptable to
Beneficiary; (iii) the delivery to Beneficiary of plans and specifications for
the work, a contract for the work signed by a contractor acceptable to
Beneficiary, a cost breakdown for the work and a payment and performance bond
for the work, all of which shall be acceptable to Beneficiary; and (iv) the
delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that after
completion of the work, and sufficient time has elapsed to re-lease the Property
(but in no event longer than six months after completion of the work), the
income from the Property will be sufficient to pay all expenses and debt service
for the Property; (bb) of the continuation of Leases acceptable to and required
by Beneficiary; (cc) that upon completion of the work, the size, capacity and
total value of the Property will be at least as great as it was before the
damage or condemnation occurred; (dd) that there has been no material adverse
change in the financial condition or credit of Trustor since the date of this
Deed of Trust; and (ee) of the satisfaction of any additional conditions that
Beneficiary may reasonably establish to protect its security. Trustor hereby
acknowledges that the conditions described above are reasonable, and, if such
conditions have not been satisfied or progress satisfactory to the Beneficiary
made by Trustor in achieving satisfaction of the conditions within ninety (90)
days of receipt by Beneficiary of such insurance or condemnation proceeds, then
Beneficiary may apply such insurance or condemnation proceeds to pay down
principal of the Secured Obligations in such order and amounts as Beneficiary in
its sole discretion may choose.
4.7 Performance of Lease Obligations. Trustor will use commercially
reasonable efforts to keep the Property fully leased at rental rates prevailing
in the market and to perform, in all material respects, all of Trustor's
obligations under or in connection with each present and future lease of all or
any part of the Property ("Leases").
4.8 Liens, Encumbrances and Charges. Trustor shall immediately
discharge any lien not approved by Beneficiary in writing that has or may attain
priority over this Deed of Trust. Subject to the provisions of the Loan
Agreement regarding mechanics' liens, Trustor shall pay when due all obligations
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secured by or reducible to liens and encumbrances which shall now or hereafter
encumber or appear to encumber all or any part of the Property or any interest
therein, whether senior or subordinate hereto.
4.9 Management. The Trustor will provide and maintain good and
efficient management of the Property satisfactory to Beneficiary. Trustor shall
obtain Beneficiary's advance written approval of any management provided, and of
any contract therefor or assignment thereof, which written approval shall not be
unreasonably withheld, conditioned or delayed.
4.10 Mechanics' Liens. Trustor will keep the Property free and clear of
all stop notices, liens and claims of liens by contractors, subcontractors,
mechanics, laborers, materialmen, and other such persons in the manner provided
in the Loan Agreement.
4.11 Defense of Actions. Trustor will defend, at Trustor's expense, any
action, proceeding or claim which affects any Property encumbered hereby or any
interest of Beneficiary in such Property or in the Secured Obligations, and will
indemnify and hold Beneficiary harmless from all loss, damage, cost, or expense,
including attorneys' fees, which Beneficiary may incur in connection therewith.
4.12 Inventories; Assembly of Tangible Personalty. Trustor will, from
time to time at the request of Beneficiary, supply Beneficiary with a current
inventory of the Tangible Personalty, in such detail as Beneficiary may require.
Upon the occurrence of any Event of Default hereunder, Trustor will, at
Beneficiary's request assemble the Tangible Personalty and make the Tangible
Personalty available to Beneficiary at any place designated by Beneficiary which
is reasonably convenient to both parties.
4.13 Further Assurances; Estoppel Certificates. Trustor will execute
and deliver to Beneficiary upon demand, and pay the costs of preparation and
recording thereof, any further documents which Beneficiary may request to
confirm or perfect the liens and security interests created or intended to be
created hereby, or to confirm or perfect any evidence of the Secured
Obligations. Trustor will also, within ten (10) days after any request by
Beneficiary, deliver to Beneficiary a signed and acknowledged statement
certifying to Beneficiary, or to any proposed transferee of the Secured
Obligations, (a) the balance of principal, interest, and other sums then
outstanding under the Note, and (b) whether Trustor claims to have any offsets
or defenses with respect to the Secured Obligations and, if so, the nature of
such offsets or defenses.
4.14 Parking Requirements. Trustor shall maintain at all times
sufficient parking spaces to comply, in all material respects, with the parking
requirements of all Leases, zoning and other regulations affecting the Property.
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4.15 Financial Statements and Inspection of Records. Trustor, at
Trustor's expense, shall furnish to Beneficiary the financial and other reports
required by the Loan Agreement.
4.16 Security Deposits. Upon the occurrence of a Default and during its
continuance, required by the Beneficiary, Trustor shall keep and maintain in a
separate Beneficiary account with Beneficiary, any security deposits or advance
payments received from tenants in lieu of security deposits. Upon the
Beneficiary's request, the Beneficiary shall be named on the Beneficiary account
and no funds shall be withdrawn therefrom without the prior written consent of
the Beneficiary.
4.17 Acceptance of Trust; Powers and Duties of Trustee.
(a) Trustee accepts this trust when this Deed of Trust is delivered
by Trustor to Beneficiary. Except as may be required by applicable law, Trustee
may from time to time apply to any court of competent jurisdiction for aid and
direction in the execution of the trust hereunder and the enforcement of the
rights and remedies available hereunder, and may obtain orders or decrees
directing or confirming or approving acts in the execution of said trust and the
enforcement of said remedies.
(b) Trustee shall not be required to take any action toward the
execution and enforcement of the trust hereby created or to institute, appear
in, or defend any action, suit, or other proceeding in connection therewith
where, in his opinion, such action would be likely to involve him in expense or
liability, unless requested so to do by a written instrument signed by
Beneficiary and, if Trustee so requests, unless Trustee is tendered security and
indemnity satisfactory to Trustee against any and all cost, expense, and
liability arising therefrom. Trustee shall not be responsible for the execution,
acknowledgment, or validity of the Loan Documents, or for the proper
authorization thereof, or for the sufficiency of the lien and security interest
purported to be created hereby, and Trustee makes no representation in respect
thereof or in respect of the rights, remedies, and recourses of Beneficiary.
(c) With the approval of Beneficiary, Trustee shall have the right
to take any and all of the following actions: (i) to select, employ, and advise
with counsel (who may be, but need not be, counsel for Beneficiary) upon any
matters arising hereunder, including the preparation, execution, and
interpretation of the Loan Documents, and shall be fully protected in relying as
to legal matters on the advice of counsel, (ii) to execute any of the trusts and
powers hereof and to perform any duty hereunder either directly or through his
agents or attorneys, (iii) to select and employ, in and about the execution of
his duties hereunder, suitable accountants, engineers and other experts, agents
and attorneys-in-fact, either corporate or individual, not regularly in the
employ of Trustee, and Trustee shall not be answerable for any act, default,
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negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable care, or for any error of
judgment or act done by Trustee in good faith, or be otherwise responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence or bad faith, and (iv) any and all other lawful action as Beneficiary
may instruct Trustee to take to protect or enforce Beneficiary's rights
hereunder. Trustee shall not be personally liable in case of entry by Trustee,
or anyone entering by virtue of the powers herein granted to Trustee, upon the
Property for debts contracted for or liability or damages incurred in the
management or operation of the Property. Trustee shall have the right to rely on
any instrument, document, or signature authorizing or supporting any action
taken or proposed to be taken by Trustee hereunder, believed by Trustee in good
faith to be genuine. Trustee shall be entitled to reimbursement for expenses
incurred by Trustee in the performance of Trustee's duties hereunder and to
reasonable compensation for such of Trustee's services hereunder as shall be
rendered. TRUSTOR WILL, FROM TIME TO TIME, PAY THE REASONABLE COMPENSATION DUE
TO TRUSTEE HEREUNDER AND REIMBURSE TRUSTEE FOR, AND INDEMNIFY AND HOLD HARMLESS
TRUSTEE AGAINST, ANY AND ALL LIABILITY AND REASONABLE EXPENSES WHICH MAY BE
INCURRED BY TRUSTEE IN THE PERFORMANCE OF TRUSTEE'S DUTIES.
(d) All moneys received by Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated in any manner from any other moneys (except to the
extent required by applicable law) and Trustee shall be under no liability for
interest on any moneys received by Trustee hereunder.
(e) Should any deed, conveyance, or instrument of any nature be
required from Trustor by any Trustee or substitute Trustee to more fully and
certainly vest in and confirm to the Trustee or substitute Trustee such estates,
rights, powers, and duties, then, upon request by the Trustee or substitute
Trustee, any and all such deeds, conveyances and instruments shall be made,
executed, acknowledged, and delivered and shall be caused to be recorded and/or
filed by Trustor.
(f) By accepting or approving anything required to be observed,
performed, or fulfilled or to be given to Trustee pursuant to the Loan
Documents, including without limitation, any deed, conveyance, instrument,
officer's certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal, or insurance policy, Trustee shall not
be deemed to have warranted, consented to, or affirmed the sufficiency,
legality, effectiveness, or legal effect of the same, or of any term, provision,
or condition thereof, and such acceptance or approval thereof shall not be or
constitute any warranty or affirmation with respect thereto by Trustee.
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4.18 Compensation; Exculpation; Indemnification.
(a) Trustor shall pay Trustee's reasonable fees and reimburse
Trustee for reasonable expenses in the administration of this trust, including
reasonable attorneys' fees. Trustor shall pay to Beneficiary reasonable
compensation for services rendered concerning this Deed of Trust, including
without limit any statement of amounts owing under any Secured Obligation.
Beneficiary shall not directly or indirectly be liable to Trustor or any other
person as a consequence of (i) the exercise of the rights, remedies or powers
granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of
Beneficiary to perform or discharge any obligation or liability of Trustor under
any agreement related to the Property or Collateral or under this Deed of Trust;
or (iii) any loss sustained by Trustor or any third party resulting from
Beneficiary's failure (whether by malfeasance, nonfeasance or refusal to act) to
lease the Property after a Default (defined in the Loan Agreement) or from any
other act or omission (regardless of whether same constitutes negligence) of
Beneficiary in managing the Property after a Default unless the loss is caused
by the gross negligence or willful misconduct of Beneficiary and no such
liability shall be asserted against or imposed upon Beneficiary, and all such
liability is hereby expressly waived and released by Trustor.
(b) TRUSTOR INDEMNIFIES TRUSTEE AND BENEFICIARY AGAINST, AND HOLDS
TRUSTEE AND BENEFICIARY HARMLESS FROM, ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS,
CAUSES OF ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS' FEES AND OTHER LEGAL
EXPENSES, COST OF EVIDENCE OF TITLE, COST OF EVIDENCE OF VALUE, AND OTHER
EXPENSES WHICH EITHER MAY SUFFER OR INCUR: (i) BY REASON OF THIS DEED OF TRUST;
(ii) BY REASON OF THE EXECUTION OF THIS TRUST OR IN PERFORMANCE OF ANY ACT
REQUIRED OR PERMITTED HEREUNDER OR BY LAW; (iii) AS A RESULT OF ANY FAILURE OF
TRUSTOR TO PERFORM TRUSTOR'S OBLIGATIONS; OR (iv) BY REASON OF ANY ALLEGED
OBLIGATION OR UNDERTAKING ON BENEFICIARY'S PART TO PERFORM OR DISCHARGE ANY OF
THE REPRESENTATIONS, WARRANTIES, CONDITIONS, COVENANTS OR OTHER OBLIGATIONS
CONTAINED IN ANY OTHER DOCUMENT RELATED TO THE SUBJECT PROPERTY AND COLLATERAL.
THE ABOVE OBLIGATION OF TRUSTOR TO INDEMNIFY AND HOLD HARMLESS TRUSTEE AND
BENEFICIARY SHALL SURVIVE THE RELEASE AND CANCELLATION OF THE SECURED
OBLIGATIONS AND THE RELEASE OR PARTIAL RELEASE OF THE LIEN OF THIS DEED OF
TRUST.
(c) Trustor shall pay all amounts and indebtedness arising under
this Section 4.18 immediately upon demand by Trustee or Beneficiary together
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with interest thereon from the date the indebtedness arises at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
4.19 Substitution of Trustees. Beneficiary may, from time to time, by a
written instrument executed and acknowledged by Beneficiary, mailed to Trustor
and recorded in the county in which the Property is located and by otherwise
complying with the provisions of applicable law, substitute a successor or
successors to any Trustee named herein or acting hereunder, and such
successor(s) shall, without conveyance from the Trustee predecessor, succeed to
all title, estate, rights, powers and duties of such predecessor.
ARTICLE 5
TRUSTOR'S NEGATIVE COVENANTS
5.1 Waste. Trustor will not commit or permit any waste with respect to
the Property or the Collateral.
5.2 Zoning and Private Covenants. Except as specifically provided in
the Loan Agreement, if at all, Trustor will not initiate, join in, or consent to
any change in any zoning ordinance or classification, any change in the "zone
lot" or "zone lots" (or similar zoning unit or units) presently comprising the
Property, any change in any private restrictive covenant, or any change in any
other public or private restriction limiting or defining the uses which may be
made of the Property or any part thereof, without the express written consent of
Beneficiary, which consent shall not be unreasonably withheld, conditioned or
delayed. If under applicable zoning provisions the use of all or any part of the
Property is or becomes a nonconforming use, Trustor will not cause such use to
be discontinued or abandoned without the express written consent of Beneficiary.
5.3 Due on Sale or Encumbrance. Except as provided in the Loan
Agreement, if the Property or any interest therein shall be sold, transferred
(including, without limitation, through sale or transfer of a majority or
controlling interest of the corporate stock or general partnership interests or
limited liability company interests of Trustor), mortgaged, assigned, further
encumbered or leased, whether directly or indirectly, whether voluntarily,
involuntarily or by operation of law, without the prior written consent of
Beneficiary, then Beneficiary, in its sole discretion, may declare all Secured
Obligations immediately due and payable.
5.4 Transfer or Removal of Tangible Personalty. Trustor will not sell,
transfer or remove from the Property all or any material part of the Tangible
Personalty, unless the items sold, transferred, or removed are contemporaneously
replaced with similar items of equal or greater value.
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5.5 Further Encumbrance of Collateral. Trustor will not make any
purchase or conditional sale, lease or agreement under which title is reserved
in the vendor of any Collateral to be placed in or upon any of the buildings or
improvements on the said Property; nor create or permit any junior lien,
security interest or other encumbrance against the Collateral without the prior
written consent of Beneficiary.
5.6 Change of Name. Trustor will not change the name under which
Trustor does business, or adopt or begin doing business under any other name or
assumed or trade name, without first notifying Beneficiary of Trustor's
intention to do so and delivering to Beneficiary such executed modifications or
supplements of this Deed of Trust (and to any financing statement which may be
filed in connection herewith) as Beneficiary may require, except as specifically
permitted in the Loan Agreement.
5.7 Improper Use of Property or Collateral. Trustor will not use the
Property or the Collateral for any purpose or in any manner, or take any action
with respect to the Property which violates any applicable law, ordinance, or
other governmental requirement, the requirements or conditions of any insurance
policy, or any private covenant.
5.8 Right Of Inspection. Beneficiary, its agents and employees, may
enter the Property at any reasonable time for the purpose of inspecting the
Property and ascertaining Trustor's compliance with the terms hereof.
ARTICLE 6
EVENTS OF DEFAULT
Each of the following events will constitute a default (an "Event of
Default") under this Deed of Trust and under each of the other Loan Documents:
6.1 Failure to Pay. Default shall be made in the payment of any
installment of principal or interest on the Note or any other sum under the Loan
Documents when due (after giving consideration to (a) any grace period which may
be applicable under such document and (b) any notice which may be required under
such document).
6.2 Loan Agreement. The occurrence of an Event of Default under the
Loan Agreement.
6.3 Cross Default. A default under that certain Mortgage, Security
Agreement, Financing Statement and Absolute Assignment of Rents and Revenues,
dated of even date herewith, executed by the Community Savanna Club Joint
Venture, which secures the Note and encumbers property situated in the County of
St. Lucie, State of Florida, and such default is not cured within the applicable
cure periods, if any.
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6.4 Superior Lien Against the Property. The assertion of any claim of
priority over this Deed of Trust, by title, lien, or otherwise in any legal,
administrative, or equitable proceeding, unless such assertion be withdrawn, or
effective action satisfactory to Beneficiary commenced (and thereafter
diligently prosecuted) and Beneficiary is secured against any loss or damage
therefrom, within 30 days of the assertion of such claim.
6.5 Abandonment. The actual or constructive abandonment of all or a
substantial portion of the Property or the Collateral (such abandonment
constituting an assignment to Beneficiary, at Beneficiary's option, of Trustor's
interest in any lease or contract now or hereafter affecting the abandoned
property).
6.6 Valid First Lien. The failure of Beneficiary to have a valid first
lien against the entire Property and Collateral as to all advances made now or
at any time in the future pursuant to the Note, this Deed of Trust, or any other
Loan Documents.
6.7 Breach of Covenant. Trustor's failure to keep, observe, perform,
carry out, and execute in all material respects the covenants, agreements,
obligations, and conditions (other than those set out in Sections 6.1 through
6.2, above) set out in this Deed of Trust, the Note, the Loan Agreement, and any
other Loan Document executed by Trustor in connection with or as security for
the Note, unless such failure is cured to Beneficiary's satisfaction following
written notice by Beneficiary to Trustor of such failure. Such notice shall be
titled "Notice of Default" and shall specify the default and, if curable, the
time for cure of such default set forth in the Loan Documents, and if no time
for cure is specified in the Loan Documents, the time for cure shall be 30 days;
provided, however, an Event of Default shall not be deemed to have occurred if
the Default is not curable within the applicable cure period so long as the
Trustor promptly gives written notice to the Beneficiary describing the
Trustor's plan of cure and schedule to cure and commences such cure within
thirty (30) days of notice of Default, and diligently pursues the cure to
completion within ninety (90) days of the notice of Default. The Notice of
Default may be sent simultaneously with or in lieu of any other default notice
necessary to initiate a grace or cure period under this Deed of Trust or any
other Loan Document.
ARTICLE 7
BENEFICIARY'S REMEDIES
Immediately upon or any time after the occurrence of any Event of
Default hereunder, Beneficiary may exercise any remedy available at law or in
equity, including but not limited to those listed below and those listed in the
other Loan Documents, in such sequence or combination as Beneficiary may
determine in Beneficiary's sole discretion:
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7.1 Performance of Defaulted Obligations. Beneficiary may make any
payment or perform any other obligation under the Loan Documents which Trustor
has failed to make or perform, and Trustor hereby irrevocably appoints
Beneficiary as the true and lawful attorney-in-fact for Trustor to make any such
payment and perform any such obligation in the name of Trustor, which
appointment is coupled with Beneficiary's interest in the Property and the
Collateral. All payments made and expenses (including reasonable attorneys' fees
and legal assistant's fees) incurred by Beneficiary in this connection, together
with interest thereon at the Default Rate, as set forth in the Note, from the
date paid or incurred until repaid, will be part of the Secured Obligations and
will be immediately due and payable by Trustor to Beneficiary.
7.2 Specific Performance and Injunctive Relief. Notwithstanding the
availability of legal remedies, Beneficiary will be entitled to obtain specific
performance, mandatory or prohibitory injunctive relief, or other equitable
relief requiring Trustor to cure or refrain from repeating any default.
7.3 Acceleration of Secured Obligations. Beneficiary may, without
notice or demand, declare all of the Secured Obligations immediately due and
payable in full.
7.4 Possession of Property. Beneficiary may enter and take possession
of the Property without seeking or obtaining the appointment of a receiver, may
employ a managing agent for the Property, with respect to all or any part of the
Property, either in Beneficiary's name or in the name of Trustor; provided,
however, it is not the intention of the parties hereto that an entry by
Beneficiary or a managing agent upon the Real Property under the terms of this
Deed of Trust shall make Beneficiary a party in possession in contemplation of
the law, except at the option of Beneficiary.
7.5 Enforcement of Security Interests. Beneficiary may exercise all
rights of a secured party under the Code with respect to the Collateral,
including but not limited to taking possession of, holding, and selling the
Collateral and enforcing or otherwise realizing upon any accounts and general
intangibles. Any requirement for reasonable notice of the time and place of any
public sale, or of the time after which any private sale or other disposition is
to be made, will be satisfied by Beneficiary's giving of such notice to Trustor
at least 15 days prior to the time of any public sale or the time after which
any private sale or other intended disposition is to be made. The Collateral may
be sold by the Trustee as part of the foreclosure sale of the Property as
specifically permitted by A.R.S. Section 47-9501.D.
7.6 Judicial Foreclosure. Commence an action to foreclose the lien of
this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce
any of the covenants hereof;
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7.7 Power of Sale. Exercise the power of sale herein contained and
deliver to Trustee a written statement of breach, notice of default and election
to cause Trustor's interest in the Property to be sold; or
7.8 Other Rights and Remedies. Exercise all other rights and remedies
provided herein, in any Loan Document or other document or agreement now or
hereafter securing or guaranteeing all or any portion of the Secured
Obligations, or by law, including, without limitation, the rights and remedies
provided in A.R.S. Section 33-702.B.
7.9 Exercise of Power of Sale. If Beneficiary elects to exercise the
power of sale herein contained, Beneficiary shall notify Trustee and shall
deposit with Trustee this Deed of Trust and the Note and such receipts and
evidence of expenditures made and secured hereby as Trustee may require.
(a) Upon receipt of such statement and notice from Beneficiary,
Trustee shall cause to be recorded, published and delivered to Trustor such
Notice of Sale as then required by law. Trustee shall, without demand on
Trustor, after lapse of such time as may then be required by law and after
recordation of such Notice of Sale and Notice of Sale having been given as
required by law, sell the Property at the time and place of sale fixed by it in
said Notice of Sale, either as a whole, or in separate lots or parcels or items
as Trustee shall deem expedient, and in such order as it may determine, at
public auction to the highest bidder for cash in lawful money of the United
States payable at the time of sale. Trustee shall deliver to such purchaser or
purchasers thereof its good and sufficient deed or deeds conveying the property
so sold, but without any covenant or warranty, express or implied. The recitals
in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Trustor,
Trustee or Beneficiary, may purchase at such sale and Trustor hereby covenants
to warrant and defend the title of such purchaser or purchasers.
(b) After deducting all costs, fees and expenses of Trustee and of
this Deed of Trust, including, without limitation, Trustee's fees and reasonable
attorneys' fees, and costs of evidence of title in connection with sale, Trustee
shall apply the proceeds of sale in the following priority, to payment of: (i)
first, all sums expended under the terms of the Loan Documents, not then repaid,
with accrued interest at the Default Rate (as defined in the Note); (ii) second,
all sums due under the Note, (iii) all other sums, then secured hereby; and (iv)
the remainder, if any, to the person or persons legally entitled thereto or as
provided in A.R.S. Section 33-812 or any similar or successor statute.
(c) Subject to A.R.S. Section 33-810.B., Trustee may postpone sale
of all or any portion of the Property by public announcement at such time and
place of sale, and from time to time thereafter may postpone such sale by public
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announcement or subsequently noticed sale, and without further notice make such
sale at the time fixed by the last postponement, or may, in it discretion, give
a new notice of sale.
7.10 Enforcement of Security Interests. Beneficiary may exercise all
rights of a secured party under the Uniform Commercial Code with respect to the
Collateral, including but not limited to taking possession of, holding, and
selling the Collateral and enforcing or otherwise realizing upon any accounts
and general intangibles. Any requirement for reasonable notice of the time and
place of any public sale, or of the time after which any private sale or other
disposition is to be made, will be satisfied by Beneficiary's giving of such
notice to Trustor at least 15 days prior to the time of any public sale or the
time after which any private sale or other intended disposition is to be made.
If permitted by statute or court decision, the Collateral may be sold by the
Beneficiary as part of the foreclosure sale of the Property.
7.11 Appointment of Receiver. Beneficiary shall be entitled, as a
matter of absolute right and without regard to the value of any security for the
Secured Obligations or the solvency of any person liable therefor, to the
appointment of a receiver for the Property, the Leases and the Rents and
Revenues upon ex parte application to any court of competent jurisdiction.
Trustor waives any right to any hearing or notice of hearing prior to the
appointment of a receiver.
7.12 Right to Make Repairs, Improvements. Should any part of the
Property come into the possession of Beneficiary or a receiver, whether before
or after an Event of Default, Beneficiary or the receiver and receiver's agents
shall be empowered:
(a) To take possession of the Property, Leases, Rents and Revenues
and any business conducted by Trustor or any other person thereon and any
business assets used in connection therewith and any Property in which
Beneficiary has a security interest granted by Trustor and, if the receiver
deems it appropriate, to operate the same;
(b) To exclude Trustor and Trustor's agents, servants, and
employees from the Property;
(c) With or without taking possession of the Property, to collect
the Rents and Revenues, including those past due and unpaid;
(d) To rent, lease or let all or any portion of the Property to any
party or parties at such rental and upon such terms as the Beneficiary shall,
and to pay any leasing or rental commissions associated therewith in its
discretion, determine;
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(e) To continue the development, marketing and sale of the Property
or any portion thereof;
(f) To complete any construction or development which may be in
progress;
(g) To do such maintenance and make such repairs and alterations as
the receiver deems necessary;
(h) To use all stores of materials, supplies and maintenance
equipment on the Property and to replace and replenish such items at the expense
of the receivership estate;
(i) To pay the operating expenses of the Property, including costs
of management and leasing or marketing thereof (which shall include lease
commissions, sale commissions), payments under contracts and agreements for
development and construction;
(j) To pay all taxes and assessments against the Property and any
property which is collateral for the Secured Obligations, all premiums for
insurance thereon, all utility and other operating expenses, and all sums due
under any prior or subsequent encumbrance;
(k) To borrow from the Beneficiary such funds as may be reasonably
necessary to the effective exercise of the receiver's powers, on such terms as
may be agreed upon by the receiver and the Beneficiary, but not in excess of the
Default Rate under the Note; and
(l) Generally do anything which Trustor could legally do if Trustor
were in possession of the Property.
All reasonable expenses incurred by the receiver or the receiver's agent shall
constitute part of the Secured Obligations. Any revenues collected by the
receiver shall be applied first to the expenses of the receivership (including
reasonable attorneys' fees incurred by the receiver and by Beneficiary), to
expenses of the Property, and to preserve, protect, maintain and operate the
Property and any other collateral which is security for the Secured Obligations,
and the balance shall be applied toward the Secured Obligations or any
deficiency which may result from any foreclosure sale, and then in such other
manner as the court may direct. Unless sooner terminated with the express
consent of the Beneficiary, any such receivership will continue until all
amounts remaining due under the Note have been discharged in full, or until
title to the Property has passed after foreclosure sale and all applicable
periods of redemption have expired, and in either case, the court has discharged
the receiver. Trustor covenants to promptly reimburse and pay to Beneficiary or
such receiver, at the place where the Note is payable, or at such other place as
may be designated in writing, the amount of all reasonable expenses (including
the cost of any insurance, taxes, or other charges) incurred by Beneficiary or
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such receiver in connection with its custody, preservation, use or operation of
the Property, together with interest thereon from the date incurred by
Beneficiary or such receiver at the Default Rate, as set forth in the Note, and
all such expenses, costs, taxes, interest, and other charges shall be part of
the Secured Obligations. It is agreed, however, that the risk of accidental loss
or damage to the Property is undertaken by Trustor and, except for Beneficiary's
or such receiver's willful misconduct or gross negligence, Beneficiary or such
receiver shall have no liability whatsoever for decline in value of the
Property, for failure to obtain or maintain insurance, or for failure to
determine whether any insurance ever in force is adequate as to amount or as to
the risks insured, or to complete development.
7.13 Further Assurances. Upon issuance of a deed or deeds pursuant to
foreclosure of this Deed of Trust, all right, title, and interest of the Trustor
in and to the Leases shall, by virtue of this instrument, thereupon vest in and
become the absolute property of the grantee or grantees in such deed or deeds
without any further act or assignment by the Trustor. Trustor hereby agrees to
execute all instruments of assignment or further assurance in favor of such
grantee or grantees in such deed or deeds, as may be reasonably necessary or
desirable for such purpose. But nothing contained herein shall prevent
Beneficiary from terminating any subordinated Lease or Contract not approved by
the Beneficiary through such foreclosure.
ARTICLE 8
ASSIGNMENT OF RENTS AND REVENUES
8.1 Assignment of Rents and Revenues. To further secure the Secured
Obligations, Trustor does hereby sell, assign and transfer unto the Beneficiary
all rents, issues, profits, revenue, and income now due and which may hereafter
become due under or by virtue of any leases, tenancies or agreements for
occupancy "Leases" (collectively "Rents and Revenues"), whether written or
verbal, or any letting of, or of any agreement for the use or occupancy of the
Property or any part thereof, and all proceeds from, evidence of, and benefits
and advantages to be derived therefrom, now or hereafter existing, whether or
not with the Beneficiary's approval. The Trustor does hereby appoint irrevocably
the Beneficiary its true and lawful attorney in its name and stead (with or
without taking possession of the Property) to rent, lease or let any
improvements located on the Property, to perform any obligations under Leases
upon such terms as said Beneficiary shall, in its reasonable discretion,
determine, and to collect all of said Rents and Revenues arising from or
accruing at any time hereafter, and all now due or that may hereafter become due
under each and every of the Leases or other agreements, written or verbal, or
which may hereafter exist on the Property, on the condition that Beneficiary
hereby grants to Trustor a license to collect and retain such Rents and Revenues
prior to the occurrence of any Event of Default under the Loan Agreement.
Trustor expressly covenants to apply the Rents and Revenue received, after
application for operating expenses permitted hereunder, to payment of the
Secured Obligations as and when the same become due and in compliance with the
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Loan Documents. Such license shall be revocable by Beneficiary without notice to
Trustor at any time upon or after an Event of Default under the Loan Documents,
and immediately upon any such revocation, Beneficiary shall be entitled to
receive, and Trustor shall deliver to Beneficiary, any and all Rents and
Revenues theretofore collected by Trustor which remain in the possession or
control of Trustor and all Leases and other such agreements. It is the intention
of the Trustor to create and grant, and it is the intention of Beneficiary to
create and receive, a present and absolute assignment of all of the Leases,
similar agreements, Rents and Revenue now due or which may hereafter become due,
but it is agreed that the Beneficiary's right to collect the Rents and Revenues
is conditioned upon the existence of an Event of Default under the Loan
Documents. Failure of Beneficiary at any time or from time to time to enforce
its rights under this ARTICLE 8 shall not in any manner prevent its subsequent
enforcement, and Beneficiary is not obligated to collect anything hereunder, but
is accountable only for sums collected. Nothing contained herein shall be
construed as constituting the Beneficiary a mortgagee in possession in the
absence of the taking of actual possession of the Property by the Beneficiary
pursuant to Section 8.6 (Beneficiary's Right of Possession In Case of Default)
hereof. In the exercise of the powers herein granted to the Beneficiary, no
liability shall be asserted or enforced against the Beneficiary, all such
liability being expressly waived and released by Trustor.
8.2 Covenants Regarding Leases. Trustor agrees:
(a) Not to execute any Leases affecting the Property or any part
thereof except on residential lease forms reasonably approved by the Beneficiary
and upon rental terms prevailing in the market, without the prior written
consent of Beneficiary, which consent shall not be unreasonably withheld,
conditioned or delayed;
(b) Not to execute any other assignments of said Leases or any
interest therein or any of the Rents and Revenues thereunder;
(c) That notwithstanding any variation of the terms of the Deed of
Trust or any extension of time for payment thereunder or any release of part or
parts of the Property, the Leases, Rents and Revenues hereby assigned, insofar
as they relate to the unreleased Property, shall continue as additional security
in accordance with the terms hereof;
(d) To hold and account for all security deposits in the manner
provided for under any state or local laws or ordinances applicable to the
Property or under the Loan Documents; and
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(e) To perform all of the Trustor's covenants and agreements under
the Leases and not to suffer or permit to occur any release of liability of the
lessees except in the exercise of its business judgment as a prudent landlord.
8.3 Representations Regarding Leases. Trustor represents and warrants
(a) that, the Leases, if any, are in full force and effect; (b) that the Leases
and the Rents and Revenues thereunder have not been heretofore sold, assigned,
transferred, or set over by Trustor or by any person or persons whatsoever; (c)
that no material default exists on the part of the lessees thereunder, or the
Trustor as lessor; (d) that the payment of none of the rents have been or,
except to the extent otherwise prudent under customary commercial standards
exercised in the ordinary course of business, will be waived, released, reduced,
discounted or otherwise discharged or compromised by the Trustor directly or
indirectly by assuming any lessee's obligations with respect to other premises;
(e) Trustor has good right to sell, assign, transfer, and set over the same and
to grant to and confer upon Beneficiary the rights, interests, powers, and
authorities herein granted and conferred.
8.4 Further Assignments. Trustor shall give Beneficiary at any time
upon demand any further or additional forms of assignment of transfer of such
Rents and Revenues, leases and security as may be reasonably requested by
Beneficiary, and shall deliver to Beneficiary executed copies of all such leases
and security.
8.5 Authority of Beneficiary. Any tenants or occupants of any part of
the Property are hereby authorized to recognize the claims of Beneficiary
hereunder without investigating the reason for any action taken by Beneficiary,
or the validity or the amount of indebtedness owing to Beneficiary, or the
existence of a Default or Event of Default under any Loan Document, or the
application to be made by Beneficiary of any amounts to be paid to Beneficiary.
The sole signature of Beneficiary or a receiver shall be sufficient for the
exercise of any rights under this ARTICLE 8 and the sole receipt of Beneficiary
or a receiver for any sums received shall be a full discharge and release
therefor to any such tenant or occupant of the Property; and Trustor hereby
releases each such tenant and occupant or purchaser which makes payments to
Beneficiary under this ARTICLE 8 from any liability under the applicable Lease
or occupancy agreement. Checks for all or any part of the rentals collected
under this ARTICLE 8 shall be drawn to the exclusive order of Beneficiary or
such receiver.
8.6 Indemnification of Beneficiary. Nothing herein contained shall be
deemed to obligate Beneficiary to perform or discharge any obligation, duty, or
liability of lessor under any Lease of the Property, and Trustor shall and does
hereby indemnify and hold Beneficiary harmless from any and all liability, loss,
or damage which Beneficiary may or might incur under any Lease of the Property
or by reason of this assignment; and any and all such liability, loss, or damage
incurred by Beneficiary, together with the costs and expenses, including
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reasonable attorneys' fees, incurred by Beneficiary in defense of any claims or
demands therefor (whether successful or not), shall be additional Secured
Obligations, and Trustor shall reimburse Beneficiary therefor on demand.
8.7 Beneficiary's Right of Possession in Case of Event of Default. In
any case in which under the provision of this Deed of Trust, the Beneficiary has
a right to institute foreclosure proceedings, whether before or after the whole
principal sum secured hereby is declared to be immediately due, or whether
before or after the institution of legal proceedings to foreclose the lien
hereof or before or after sale thereunder, promptly upon demand of Beneficiary,
Trustor shall surrender to Beneficiary and Beneficiary shall be entitled to take
actual possession of the Property or any part thereof personally, or by its
agents or attorneys, as for condition broken, and Beneficiary in its discretion
may, with or without force and with or without process of law, enter upon and
take and maintain possession of all or any part of the Property, together with
all documents, books, records, papers and accounts of the Trustor or then owners
of the Property relating thereto, and may exclude the Trustor, its agents or
servants, wholly therefrom and may, as attorney-in-fact or agent of the Trustor,
or in its own name as Beneficiary and under the powers herein granted, hold,
operate, manage and control the Property and conduct the business, if any,
thereof, either personally or by its agents, and with full power to use such
measures, legal or equitable, as in its discretion or in the discretion of its
successors or assigns may be deemed proper or necessary to enforce the payment
or security of the rents, issues, revenues and profits of the Property.
8.8 Severability and Survival. The provisions of this ARTICLE 8 shall
survive the foreclosure of the lien of this Deed of Trust and the exercise of
the power of sale granted under this Deed of Trust until the expiration of all
periods of redemption following any such foreclosure or sale and thereafter with
respect to all Rents and Revenues arising prior to or attributable to the period
prior to the expiration of all such redemption periods.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Time of the Essence. Time is of the essence with respect to all
provisions of this Deed of Trust.
9.2 Rights and Remedies Cumulative. Trustee and Beneficiary, and each
of them, shall be entitled to enforce payment and performance of any and all of
the Secured Obligations and to exercise all rights and powers under the Loan
Documents and under the law now or hereafter in effect, notwithstanding some or
all of the Secured Obligations may now or hereafter be otherwise secured or
guaranteed. Neither the acceptance of this Deed of Trust nor its enforcement,
whether by court action or pursuant to the power of sale or other rights herein
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contained, shall prejudice or in any manner affect Trustee's or Beneficiary's
right to realize upon or enforce any other security or guaranty now or hereafter
held by Trustee or Beneficiary, it being agreed that Trustee and Beneficiary,
and each of them shall be entitled to enforce this Deed of Trust and any other
security or any guaranty now or hereafter held by Beneficiary or Trustee in such
order and manner as they or either of them may in their absolute discretion
determine. No remedy herein conferred upon or reserved to Trustee or Beneficiary
is intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing under the law. Every power
or remedy given by any of the Loan Documents or by law to Trustee or Beneficiary
or to which either of them may be otherwise entitled, may be exercised,
concurrently or independently, from time to time and as often as may be deemed
expedient by Trustee or Beneficiary and, to the extent permitted by law, either
of them may pursue inconsistent remedies
9.3 No Implied Waivers. Beneficiary shall not be deemed to have waived
any provision of this Deed of Trust unless such waiver is in writing and is
signed by Beneficiary. Without limiting the generality of the preceding
sentence, neither Beneficiary's acceptance of any payment with knowledge of a
default by Trustor, nor any failure by Beneficiary to exercise any remedy
following a default by Trustor shall be deemed a waiver of such default, and no
waiver by Beneficiary of any particular default on the part of Trustor shall be
deemed a waiver of any other default or of any similar default in the future.
9.4 Trustor Waiver of Rights. Trustor waives, to the extent permitted
by law, (a) the benefit of all laws now existing or that may hereafter be
enacted providing for any appraisement before sale of any portion of the
Property, and (b) all rights of redemption, valuation, appraisement, stay of
execution, notice of election to mature or declare due the Secured Obligations
and marshaling in the event of foreclosure of the liens hereby created, and (c)
all rights and remedies that Trustor may have or be able to assert by reason of
the laws of the State of Arizona pertaining to the rights and remedies of
sureties including, without limitation, A.R.S. Sections 12-1641 through 12-1646,
and Arizona Rules of Civil Procedure 17(f).
9.5 No Third Party Rights. No person shall be a third party beneficiary
of any provision of this Deed of Trust. All provisions of this Deed of Trust
favoring Beneficiary are intended solely for the benefit of Beneficiary, and no
third party shall be entitled to assume or expect that Beneficiary will or will
not waive or consent to modification of any such provision in Beneficiary's sole
discretion.
9.6 Preservation of Liability and Priority. Without affecting the
liability of Trustor or of any other person (except a person expressly released
in writing) for payment and performance of all of the Secured Obligations, and
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without affecting the rights of Beneficiary with respect to any security not
expressly released in writing, and without impairing in any way the priority of
this Deed of Trust over the interests of any person acquired or first evidenced
by recording subsequent to the recording hereof, Beneficiary may, either before
or after the maturity of the Note, and without notice or consent: (a) release
any person liable for payment or performance of all or any part of the Secured
Obligations; (b) make any agreement altering the terms of payment or performance
of all or any of the Secured Obligations; (c) exercise or refrain from
exercising, or waive, any right or remedy which Beneficiary may have under any
of the Loan Documents; (d) accept additional security of any kind for any of the
Secured Obligations; or (e) release or otherwise deal with any real or personal
property securing the Secured Obligations. Any person acquiring or recording
evidence of any interest of any nature in the Property or the Collateral shall
be deemed, by acquiring such interest or recording any evidence thereof, to have
agreed and consented to any or all such actions by Beneficiary.
9.7 Subrogation of Beneficiary. Beneficiary shall be subrogated to the
lien of any previous encumbrance discharged with funds advanced by Beneficiary
under the Loan Documents, regardless of whether such previous encumbrance has
been released of record.
9.8 Notices. Any notice required or permitted to be given by Trustor or
Beneficiary under this Deed of Trust shall be in writing and will be deemed
given (a) upon personal delivery or upon confirmed transmission by telecopier or
similar facsimile transmission device, (b) on the first business day after
receipted delivery to a courier service which guarantees next-business-day
delivery, or (c) on the third business day after mailing, by registered or
certified United States mail, postage prepaid, in any case to the appropriate
party at its address set forth below:
If to Trustor:
Asset Investors Operating Partnership, L.P.
c/o Asset Investors Corporation
3410 S. Galena Street, Suite 210
Denver, CO 80231
Attn: Chief Financial Officer
Telecopy No.: 303-614-9401
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With a copy to:
Joseph Gaynor, Esq.
Brandywine Real Estate Management Services Corporation
2637 McCormick Drive
Clearwater, Florida 33759-1041
Telecopy No.: 727-791-7920
If to Beneficiary:
U.S. Bank National Association
918 Seventeenth Street, Fifth Floor
Denver, CO 80202
Attention: Cyd Petre, Vice President
Telecopy No.: 303-585-4198
With a copy to:
Gorsuch Kirgis LLP
Tower I, Suite 1000
1515 Arapahoe Street
Denver, CO 80202
Attention: Connie B. Hyde, Esq.
Telecopy No.: 303-376-5001
Any person may change such person's address for notices or copies of notices by
giving notice to the other party in accordance with this section.
9.9 Further Assurances. Upon issuance of a deed or deeds pursuant to
foreclosure of this Deed of Trust, all right, title, and interest of the Trustor
in and to the Leases shall, by virtue of this instrument, thereupon vest in and
become the absolute property of the grantee or grantees in such deed or deeds
without any further act or assignment by the Trustor. Trustor hereby agrees to
execute all instruments of assignment or further assurance in favor of such
grantee or grantees in such deed or deeds, as may be necessary or desirable for
such purpose.
9.10 Defeasance. Upon payment and performance in full of all the
Secured Obligations and all costs of releasing this Deed of Trust, Beneficiary
will execute and deliver to Trustor such documents as may be required to release
this Deed of Trust of record.
9.11 Illegality. If any provision of this Deed of Trust is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Deed of Trust, the legality, validity, and enforceability of
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the remaining provisions of this Deed of Trust shall not be affected thereby,
and in lieu of each such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Deed of Trust a provision as similar in
terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid, and enforceable. If the rights and liens created by this
Deed of Trust shall be invalid or unenforceable as to any part of the Secured
Obligations, then the unsecured portion of the Secured Obligations shall be
completely paid prior to the payment of the remaining and secured portion of the
Secured Obligations, and all payments made on the Secured Obligations shall be
considered to have been paid on and applied first to the complete payment of the
unsecured portion of the Secured Obligations.
9.12 Obligations Binding Upon Trustor's Successors. This Deed of Trust
is binding upon Trustor and Trustor's successors and assigns, including all
grantees and remote grantees of any interest of Trustor in the Property, and
shall inure to the benefit of Beneficiary, and its successors and assigns, and
the provisions hereof shall likewise be covenants running with the land. The
duties, covenants, conditions, obligations, and warranties of Trustor in this
Deed of Trust shall be joint and several obligations of Trustor and Trustor's
successors and assigns.
9.13 Further Assurances. Upon issuance of a deed or deeds pursuant to
foreclosure of this Deed of Trust, all right, title, and interest of the Trustor
in and to the Leases shall, by virtue of this instrument, thereupon vest in and
become the absolute property of the grantee or grantees in such deed or deeds
without any further act or assignment by the Trustor. Trustor hereby agrees to
execute all instruments of assignment or further assurance in favor of such
grantee or grantees in such deed or deeds, as may be necessary or desirable for
such purpose.
9.14 Governing Law. THIS AGREEMENT AND THE LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO (WITHOUT GIVING EFFECT TO COLORADO'S PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT (A) OF PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING ONLY TO THE CREATION, PERFECTION, FORECLOSURE AND ENFORCEMENT
OF RIGHTS AND REMEDIES AGAINST SPECIFIC COLLATERAL, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED (THE
"COLLATERAL STATE"), AND (B) THAT THE LAWS OF THE UNITED STATES OF AMERICA AND
ANY RULES REGULATIONS, OR ORDERS ISSUED OR PROMULGATED THEREUNDER, APPLICABLE TO
THE AFFAIRS AND TRANSACTIONS ENTERED INTO BY THE BENEFICIARY, OTHERWISE PREEMPT
COLLATERAL STATE LAW OR COLORADO LAW; IN WHICH EVENT SUCH FEDERAL LAW SHALL
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CONTROL. TRUSTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY COLORADO OR FEDERAL COURT SITTING IN DENVER, COLORADO (OR ANY STATE IN WHICH
THE PROPERTY IS LOCATED) OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS.
9.15 Survival. This Deed of Trust shall survive foreclosure of the
liens created hereby, to the extent necessary to fulfill its purposes.
9.16 Captions. The captions and headings of various paragraphs of this
Deed of Trust are for convenience only and are not to be construed as defining
or limiting, in any way, the scope or intent of the provisions hereof.
Signed and delivered as of the date first mentioned above.
TRUSTOR:
AIOP LOST DUTCHMAN NOTES, L.L.C., a
Delaware limited liability company
By: ASSET INVESTORS OPERATING
PARTNERSHIP, L.P., a Delaware
limited partnership, Sole Member
and Manager
By: ASSET INVESTORS CORPORATION,
a Delaware corporation,
General Partner
By: /s/David M. Becker
------------------------
David M. Becker
Chief Financial Officer
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STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Lost Dutchman Notes, L.L.C., a Delaware limited liability
company.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-----------------------------
Notary Public
( S E A L )
32
Prepared by and return to:
Connie B. Hyde, Esq.
Gorsuch Kirgis LLP
Tower I, Suite 1000
1515 Arapahoe Street
Denver, CO 80202
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ABSOLUTE
ASSIGNMENT OF RENTS AND REVENUES
(Florida Property)
THIS MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT, AND ABSOLUTE
ASSIGNMENT OF RENTS AND REVENUES (this "Mortgage") is given as of the 7 day of
April, 2000, by the Mortgagor named below to the Mortgagee named below.
ARTICLE I
PARTIES, PROPERTY, AND DEFINITIONS
The following terms and references shall have the meanings indicated:
1.1 Mortgagor: COMMUNITY SAVANNA CLUB JOINT VENTURE, a Delaware general
partnership, whose legal address is 3410 South Galena Street, Suite 210, Denver,
Colorado 80231, together with any future owner of the Property or any part
thereof or interest therein.
1.2 Mortgagee: U. S. BANK NATIONAL ASSOCIATION, whose legal address is
918 Seventeenth Street, Fifth Floor, Denver, Colorado 80202, together with any
legal holder of the Note.
1.3 Note: The Promissory Note of even date herewith, executed by
Mortgagor, Asset Investors Operating Partnership, L.P., a Delaware limited
partnership ("Operating Partnership"), and AIOP Lost Dutchman Notes, L.L.C., a
- ----------------------
THIS MORTGAGE EVIDENCES A MULTI-STATE LOAN WHICH IS SECURED BY REAL PROPERTY
LOCATED OUTSIDE THE STATE OF FLORIDA AND REAL PROPERTY LOCATED IN ST. LUCIE
COUNTY, FLORIDA. FLORIDA DOCUMENTARY STAMP TAX IN THE AMOUNT OF $32,200.00 AND
FLORIDA NON-RECURRING INTANGIBLE PERSONAL PROPERTY TAX IN THE AMOUNT OF
$10,974.00 ARE BEING PAID UPON RECORDING OF THIS MORTGAGE. ATTACHED HERETO AS
EXHIBIT C IS A DESCRIPTION OF THE CALCULATION OF LIABILITY FOR DOCUMENTARY STAMP
TAX AND NON-RECURRING INTANGIBLE PERSONAL PROPERTY TAX.
<PAGE>
Delaware limited liability company ("AIOP Notes"), payable to the order of
Mortgagee in the principal face amount of $15,000,000.00, the last payment under
which is due on May 31, 2001, unless such due date is extended or accelerated,
together with all renewals, extensions, and modifications of the Note. All terms
and provisions of the Note are incorporated by this reference in this Mortgage.
1.4 Loan Agreement: The Line of Credit Agreement ("Loan Agreement") of
even date herewith executed by Mortgagor, Operating Partnership, AIOP Notes,
AIOP Florida Properties I, L.L.C., a Delaware limited liability company, AIOP
Florida Properties II, L.L.C., a Delaware limited liability company, the
Mortgagee, and all renewals, extensions, and modifications of the Loan
Agreement. All capitalized terms not otherwise defined herein shall bear the
meaning given to them in the Loan Agreement.
1.5 Real Property: The real property described in Exhibit A, attached
hereto and by this reference incorporated herein, together with all right, title
and interest of Mortgagor in the following with respect to the real property,
whether now owned or hereafter acquired by Mortgagor:
(a) All improvements now or hereafter located on such real property
(excluding manufactured homes and setups owned by third parties) and all
easements and appurtenances thereto;
(b) The land lying within any street or roadway adjoining the real
property; any vacated or hereafter vacated street or alley adjoining the real
property; and any strips and gores adjoining the real property;
(c) All and singular the passages, waters, water rights (whether
tributary or non-tributary or not non-tributary), water courses, riparian
rights, wells, well permits, water stock, other rights, liberties and privileges
thereof or in any way now or hereafter appertaining to the real property,
including homestead and any other claim at law or in equity, as well as any
after acquired title, franchise or license, and the reversion and reversions and
remainder and remainders thereof;
(d) All of the rents, royalties, income (including, without
limitation, operating income), receipts, revenues, issues, and profits of and
from the use, operation, or enjoyment of such real property and improvements
(collectively, the "Income"), whether such Income is attributable to the period,
or is collected, prior to or subsequent to any default by Mortgagor;
(e) All machinery, apparatus, equipment, fittings, fixtures
(whether actually or constructively attached or incorporated, and including all
trade, domestic, and ornamental fixtures, but excluding manufactured homes and
setups owned by third parties) now or hereafter located in, upon, or under such
real property or improvements and used or usable in connection with any present
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or future operation thereof, including but not limited to all lighting, utility,
and power equipment; engines; pipes; pumps; tanks; motors; conduits; utility
systems, plumbing, lifting, cleaning, fire prevention, fire extinguishing,
signage, heating, air-conditioning; communication apparatus; water heaters;
ranges; furnaces; appliances, refrigerators, stoves; shades, awnings, screens,
storm doors and windows; attached cabinets; rugs, carpets and draperies and all
additions thereto and replacements therefor;
(f) All other and greater rights and interests of every nature in
such property and in the possession or use thereof and income therefrom, whether
now owned or subsequently acquired by Mortgagor.
1.6 Tangible Personalty: All right, title and interest of the Mortgagor
in and to the following with respect to the Real Property: All goods, trade
fixtures, fixtures, inventory, furnishings, fittings, machinery, apparatus,
equipment, building and other materials, supplies, and other tangible personal
property of every nature now owned or hereafter acquired by Mortgagor and used,
intended for use, or reasonably required in the development, construction,
reconstruction, alteration, repair, or operation of the Property and any
improvements or infrastructure located thereon, together with all accessions
thereto, replacements and substitutions therefor, and proceeds thereof,
including, without limitation, to the extent not deemed to be real property
under this Mortgage, all apparatus, machinery, motors, elevators, fittings,
equipment, and other furnishings and all plumbing, heating, lighting, cooking,
laundry, ventilating, refrigerating, incinerating, air-conditioning and
sprinkler equipment and fixtures and appurtenances thereto, all clubhouse and
swimming pool equipment, lockers, lifeguard equipment, lawn or deck chairs,
towels, swimming pool cleaning and maintenance equipment, recreational and
fitness equipment, including but not limited to rowing machines, stationery
bikes, nautilus equipment and appurtenances thereto..
1.7 Intangible Personalty: All right, title and interest of the
Mortgagor in and to the following with respect to the Real Property:
(a) All of the rents, royalties, income (including, without
limitation, operating income), receipts, revenues, issues, and profits of and
from the use, operation, or enjoyment of such real property and improvements
(collectively, the "Income"), whether such Income is attributable to the period,
or is collected, prior to or subsequent to any default by Mortgagor and all
causes of action associated with the collection of such Income;
(b) All of the licenses, permits, franchises, and other
entitlements to use and all rights thereto which have been issued by or which
are pending before any governmental or quasi-governmental agency which are
necessary or appropriate for the Property;
(c) All accounts, accounts receivable, deposit accounts, escrow
accounts, monies, claims, causes of action, rights to payment, prepaid insurance
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and other prepaid items, contracts, contract rights, refunds and rebates,
maintenance contracts, maintenance warranties, continuing agreements, general
intangibles associated with the Property and insurance proceeds;
(d) All water taps, sewer taps, building permits, curb cut permits,
storm water discharge permits, refunds, rebates or deposits due or to become due
from any utility companies or governmental entity, agency, authority, board,
commission, or governing body authorized by federal, state or local laws or
regulations as having jurisdiction over the real property; and
(e) The absolute right to Mortgagor's interest in any trade name
used by Mortgagor in connection with the Property and all of Mortgagor's rights
in and to contract rights, leases, concessions, trade names, trademarks, service
marks, logos, operating systems, trade secrets, technology and technical
information, copyrights, warranties, licenses, plans, drawings and other items
of intangible personal property relating to the ownership or operation of the
Property.
(f) All plans and specifications for the improvements on the real
property; soil, environmental, engineering, land planning maps, surveys and
other studies and reports concerning the real property or prepared for the
orderly planning and development of the real property, including all plans,
drawings and studies concerning the platting or replatting of the real property;
all contracts and subcontracts relating to the improvements on the real
property, or any thereof;
(g) All awards and payments, including interest thereon, resulting
from the exercise of any right of eminent domain or any other public or private
taking of, casualty or injury to, or decrease in the value of, any of such real
property, including without limitation all property insurance payments, proceeds
and policies related to such real property.
1.8 Property: The Real Property, the Tangible Personalty and the
Intangible Personalty are sometimes collectively called the "Property." It is
specifically understood that the enumeration of any specific articles of the
Property, including Tangible Personalty and Intangible Personalty shall in no
wise exclude or be held to exclude any items of property not specifically
mentioned. All of the Real Property, Tangible Personalty and Intangible
Personalty, whether affixed or annexed or not, and all rights hereby conveyed
and mortgaged are intended to be as a unit and are hereby understood and agreed
and declared to be appropriated to the use of the real estate, and shall for the
purposes of this Mortgage be deemed to be real estate and conveyed and mortgaged
hereby.
(a) all of Mortgagor's rights and prerogatives arising in
connection with or by virtue of Mortgagor's ownership of lots in the real
property including, without limitation, the right to vote as a member of any lot
owners' association and all rights arising under any declaration described in
Exhibit B and under the articles of incorporation and bylaws of such
association;
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(b) all other and greater rights and interests of every nature in
such property and in the possession or use thereof and income therefrom, whether
now owned or subsequently acquired by Mortgagor.
1.9 The Secured Obligations: The Property is granted and shall be held
for the purpose of securing the following:
(a) The payment of the indebtedness as evidenced in the Note;
(b) The performance and observance of all terms, covenants,
conditions, and provisions to be performed or observed by the Mortgagor pursuant
to the terms of
(i) this Mortgage,
(ii) the Security Agreement, executed by Mortgagor,
(iii) the Environmental Indemnity Agreement executed by
Mortgagor in favor of Mortgagee (the "EIA");
(iv) UCC-1 financing statements required to perfect the
Mortgagee's security interest in the Tangible Personalty and Intangible
Personalty as granted by this Mortgage and the Security Agreement ("Financing
Statement"),
(v) the Loan Agreement, and
(vi) any and all pledge or other security agreements, loan
agreements, disbursement agreements, supplemental agreements, assignments (both
present and collateral), side letters, as the same may be amended, modified or
supplemented from time to time, being referred to hereinafter as "Related
Agreements."
The Note, this Mortgage, Security Agreement, Financing Statement, Environmental
Indemnity, Related Agreements, Loan Agreement, and any and all other documents
or instruments executed in connection with the foregoing to evidence or secure
the Note shall be hereinafter collectively called the "Loan Documents".
(c) The payment of all sums expended or advanced by Mortgagee
pursuant to the terms hereof.
(d) Payment and performance of all Future Advances and other
obligations that the then record owner of all or part of the Property may agree
to pay and/or perform (whether as principal, surety or guarantor) for the
benefit of Mortgagee, when such future advance or obligation is evidenced by a
writing which recites that it is secured by this Mortgage.
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(e) All modifications, extensions and renewals of any of the
obligations secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or interest payment
dates or both, as the case may be, deferring or accelerating payment dates
wholly or partly; or (ii) modifications, extensions or renewals at a different
rate of interest whether or not in the case of a note, the modification,
extension or renewal is evidenced by a new or additional promissory note or
notes.
Any capitalized terms not otherwise defined in Sections 1.5 through 1.7 of this
Mortgage and not defined in the Loan Agreement, shall bear the meaning given to
them in Article 9 of the UCC.
1.10 Future Advances. It is agreed that this Mortgage shall also secure
such future or additional advances as may be made by the Mortgagee at its option
to the Mortgagor, or its successor in title, for any purpose, provided that all
those advances are to be made within twenty years from the date of this
Mortgage, or within such lesser period of time as may be provided hereafter by
law as a prerequisite for the sufficiency of actual notice or record notice of
the optional future or additional advances as against the rights of creditors or
subsequent purchasers for valuable consideration. The total amount of
indebtedness secured by this Mortgage may decrease or increase from time to
time, but the total unpaid balance so secured at any one time shall not exceed
the maximum principal amount of $30,000,000.00, plus interest, and any
disbursements made for the payment of taxes, levies or insurance on the Premises
with interest on those disbursements. If, pursuant to Florida Statutes Section
697.04, Mortgagor files a notice specifying the dollar limit beyond which future
advances made pursuant to this Mortgage will not be secured by this Mortgage,
then Mortgagor shall, within one day of filing such notice, notify Mortgagee by
certified mail pursuant to Section 9.7. of this Mortgage. In addition, such a
filing shall constitute a default hereunder.
1.11 Address: The address of the Property (if known) is: 8630 South US
#1, Port St. Lucie, Florida 34852. However, neither the failure to designate an
address nor any inaccuracy in the address designated shall affect the validity
or priority of the lien of this Mortgage on the Property as described in Exhibit
A.
1.12 Obligations. The term "obligations" is used herein in its broadest
and most comprehensive sense and shall be deemed to include, without limitation,
all interest and charges, prepayment charges (if any), late charges and loan
fees at any time accruing or assessed on any of the Secured Obligations.
1.13 Incorporation. All terms of the Secured Obligations and the
documents evidencing such obligations are incorporated herein by this reference.
All persons who may have or acquire an interest in the Property shall be deemed
to have notice of the terms of the Secured Obligations and to have notice, if
provided therein, that: (a) the Note or the Loan Agreement permit advances from
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time to time; and (b) the rate of interest on one or more Secured Obligations
may vary from time to time.
ARTICLE II
GRANTING CLAUSE
2.1 Grant to Mortgagee. As security for the Secured Obligations,
Mortgagor hereby grants, bargains, sells, conveys, warrants, assigns, transfers,
mortgages and pledges the Property to Mortgagee, and subject to all provisions
hereof, TO HAVE AND TO HOLD the Property forever; PROVIDED ALWAYS, that if
Mortgagor (A) shall pay or cause to be paid to Mortgagee all of the obligations
arising out of, and according to the tenor and effect of, the Note and the Loan
Agreement; (B) shall fully perform or cause to be fully performed all covenants
and agreements set forth in the Note and Loan Documents; and (C) shall in the
meantime keep and perform the covenants and agreements herein contained, then
these presents shall have no further force and effect.
2.2 Security Interest to Mortgagee. As additional security for the
Secured Obligations, Mortgagor hereby grants to Mortgagee a security interest in
the Tangible Personalty and in the Intangible Personalty and in such of the Real
Property as may be deemed personalty (collectively, the "Collateral"). To the
extent any of the Collateral may be or has been acquired with funds advanced by
Mortgagee under the Loan Documents, this security interest is a purchase money
security interest. This Mortgage constitutes a Security Agreement under the
Uniform Commercial Code of Florida (the "UCC") with respect to any part of the
Property and Collateral that may or might now or hereafter be or be deemed to be
personal property, fixtures or property other than real estate; all of the
terms, provisions, conditions and agreements contained in this Mortgage pertain
and apply to the Collateral as fully and to the same extent as to any other
property comprising the Property, and the following provisions of this section
shall not limit the generality or applicability of any other provision of this
Mortgage but shall be in addition thereto:
(a) The Collateral shall be used by Mortgagor solely for business
purposes, being installed upon or owned in connection with the real estate
comprising part of the Property for Mortgagor's own use or as the equipment and
furnishings furnished by Mortgagor, as owner, to occupants and tenants of the
Property;
(b) The Tangible Personalty shall be kept at the real estate
comprising a part of the Property, and shall not be removed therefrom without
the consent of Mortgagee and the Tangible Personalty may be affixed to such real
estate but shall not be affixed to any other real estate;
(c) No financing statement covering any of the Collateral or any
proceeds thereof is on file in any public office; and Mortgagor will, at its
cost and expense, upon demand, furnish to Mortgagee such further information and
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will execute and deliver to Mortgagee such financing statements and other
documents in form satisfactory to Mortgagee and will do all such acts and things
as Mortgagee may at any time or from time to time reasonably request or as may
be necessary or appropriate to establish and maintain a perfected security
interest in the Collateral as security for the Secured Obligations, subject to
no adverse liens or encumbrances; and Mortgagor will pay the cost of filing the
same or filing or recording such financing statements or other documents and
this instrument in all public offices wherever filing or recording is deemed by
Mortgagee to be necessary or desirable;
(d) The terms and provisions contained in this section and in
Section 6.12 (Enforcement of Security Interests) of this Mortgage shall, unless
the context otherwise requires, have the meanings and be construed as provided
in the UCC; and
(e) This Mortgage constitutes a security agreement and financing
statement under the UCC with respect to the Collateral. As such, this Mortgage
covers all items of the Collateral that are personal property including all
items which are to become fixtures. Mortgagor is the "Debtor" and Mortgagee is
the "Secured Party" (as those terms are defined and used in the UCC) insofar as
this Mortgage constitutes a financing statement.
(f) Upon its recording in the real property records, this Mortgage
shall be effective as a financing statement filed as a fixture filing. In
addition, a carbon, photographic or other reproduced copy of this Mortgage
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement. The filing of any other financing
statement relating to any personal property, rights or interests described
herein shall not be construed to diminish any right or priority hereunder.
ARTICLE III
MORTGAGOR'S TITLE AND AUTHORITY
3.1 Warranty of Title. Mortgagor represents and warrants to Mortgagee
that Mortgagor has good and marketable title to the property described on
Exhibit A in fee simple absolute, subject only to the lien of general taxes for
the current year, payable the following year, and those additional matters, if
any, set forth in Exhibit B, attached hereto and by this reference incorporated
herein ("Permitted Exceptions"). Mortgagor further represents and warrants to
Mortgagee that Mortgagor is the absolute owner of the Collateral, free of any
liens, encumbrances, security interests, and other claims whatsoever, except
insofar as the Collateral may be encumbered by the lien of general taxes for the
current year, payable the following year. Mortgagor, for itself and its
successors and assigns, hereby agrees to warrant and forever defend, all and
singular, all of the property and property interest granted and conveyed in
trust pursuant to this Mortgage, against every person whomsoever lawfully
claiming, or to claim, the same or any part thereof, subject to the Permitted
Exceptions. The warranties contained in this section shall survive foreclosure
of this Mortgage, and shall inure to the benefit of and be enforceable by any
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person who may acquire title to the Property or the Collateral pursuant to any
such foreclosure.
3.2 Waiver of Homestead and Other Exemptions. To the extent permitted
by law, Mortgagor hereby waives all rights to any homestead or other exemption
to which Mortgagor would otherwise be entitled under any present or future
constitutional, statutory, or other provision of applicable state or federal
law.
3.3 Due Authorization. If Mortgagor is other than a natural person,
then each individual who executes this document on behalf of Mortgagor
represents and warrants to Mortgagee that such execution has been duly
authorized by all necessary corporate, partnership, or other action on the part
of Mortgagor.
ARTICLE IV
MORTGAGOR'S AFFIRMATIVE COVENANTS
4.1 Payment of Note. Mortgagor will pay all principal, interest, and
other sums payable under the Note, the Loan Agreement or this Mortgage or the
Loan Documents, on the date when such payments are due, without notice or
demand.
4.2 Performance of Other Obligations. Mortgagor will promptly and
strictly perform and comply with all other covenants, conditions, and
prohibitions required of Mortgagor by the terms of the Loan Documents.
4.3 Other Encumbrances. Mortgagor will promptly and strictly perform
and comply with all covenants, conditions, and prohibitions required of
Mortgagor in connection with any other encumbrance affecting the Property or the
Collateral, or any part thereof, or any interest therein, regardless of whether
such other encumbrance is superior or subordinate to the lien hereof. This
paragraph does not authorize any lien or encumbrance against the Property or the
Collateral except as permitted by Section 3.1 or with the prior written consent
of the Mortgagee as provided in this Mortgage.
4.4 Payment of Taxes.
(a) Property Taxes. Mortgagor will pay, before delinquency, all
taxes and assessments, including without limitation, general, special and
metropolitan district taxes, water charges, sewer service charges (collectively,
the "Impositions"), which may be levied or imposed at any time against
Mortgagor's interest and estate in the Property or the Collateral. Within ten
(10) days after request by Mortgagee, Mortgagor will deliver to Mortgagee an
official receipt for such payment or other evidence that such payment has been
made.
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(b) Deposit for Taxes. If required by the Mortgagee, concurrently
with the delivery of this Mortgage, Mortgagor has deposited with Mortgagee an
amount equal to 1/12th of the amount which Mortgagee estimates will be required
to make the next annual payment of Impositions, multiplied by the number of
whole and partial months which have elapsed since March 31 of the current year.
With each monthly payment under the Note, Mortgagor will deposit with Mortgagee
an amount equal to 1/12th of the amount which Mortgagee estimates will be
required to pay the next required installment or payment of Impositions. The
purpose of these provisions is to provide Mortgagee with sufficient funds on
hand to pay all such Imposition charges 30 days before the date on which they
become past due. Provided no default exists hereunder, Mortgagee will apply the
amounts so deposited to the payment of such Imposition when due, but in no event
will Mortgagee be liable for any interest on any amount so deposited, and the
money so received may be held and commingled with Mortgagee's own funds. If the
funds so deposited are insufficient to the Impositions for any year when the
same shall become due and payable, the Mortgagor shall, within ten (10) days
after receipt of demand therefor, deposit such additional funds as may be
necessary to pay such Impositions in full.
(c) Intangible Taxes. It is contemplated that the Mortgagor will
pay documentary stamp taxes and intangible tax applicable to the full face
amount of the Note and this Mortgage. If any additional stamp or excise tax
shall become applicable with respect to this Mortgage, the Note, any loan or
credit extended hereunder, or any security agreement, guaranty, the loan
agreement or other documents, the Mortgagor shall promptly pay such tax in full
(including interest and penalties, if any) and shall hold the Mortgagee harmless
with respect thereto. The Mortgagor's liability under this Section 4.4(c) will
survive the repayment of indebtedness under the Note. Additionally, in the event
Mortgagor is unable to pay such taxes, either for economic reasons or because
the legal provisions or decisions creating such tax, assessment or charge forbid
Mortgagor from doing so, then the Note will, at Mortgagee's option, become due
and payable in full upon thirty (30) days' prior written notice to Mortgagor.
(d) Right to Contest. Notwithstanding any other provision of this
section, Mortgagor will not be deemed to be in default solely by reason of
Mortgagor's failure to pay any Impositions so long as, in Mortgagee's judgment,
each of the following conditions is satisfied:
(i) Mortgagor is engaged in and diligently pursuing in good
faith administrative or judicial proceedings appropriate to contest the validity
or amount of such Impositions; and
(ii) Nonpayment of such Impositions will not result in the
loss or forfeiture of any Property encumbered hereby or any interest of
Mortgagee therein.
If Mortgagee determines that any one or more of such conditions is not satisfied
or is no longer satisfied, Mortgagor will pay the Impositions in question,
together with any interest and penalties thereon, within ten days after
Mortgagee gives notice of such determination.
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4.5 Maintenance of Insurance. Mortgagor shall provide and maintain
policies of insurance on the Property in accordance with the Loan Agreement.
(a) Deposit for Premiums. If required by Mortgagee, concurrently
with the delivery of this Mortgage, Mortgagor has deposited with Mortgagee an
amount equal to 1/12th of the amount which Mortgagee estimates will be required
to make the next annual payments of the premium for the policies of insurance
referred to in this section, multiplied by the number of whole and partial
months which have elapsed since the most recent policy anniversary date for each
such policy ("Insurance Premium"). With each monthly payment under the Note,
Mortgagor will deposit an amount equal to 1/12th of the amount which Mortgagee
estimates will be required to pay the next required annual premium for each
insurance policy referred to in this section. The purpose of these provisions is
to provide Mortgagee with sufficient funds on hand to pay all such Insurance
Premiums thirty (30) days before the date on which they become past due.
Mortgagor shall, within ten (10) days after receipt of demand therefor, deposit
such additional funds as are necessary to make up any deficiencies in amounts
necessary to pay such Insurance Premiums when due. Provided no default exists
hereunder, Mortgagee will apply the amounts so deposited to the payment of such
Insurance Premiums when due, but in no event will Mortgagee be liable for any
interest on any amount so deposited, and the money so received may be held and
commingled with Mortgagee's own funds.
(b) Renewal Policies. Not less than thirty (30) days prior to the
expiration date of each insurance policy required pursuant to the Loan
Agreement, Mortgagor will deliver to Mortgagee a copy of an appropriate renewal
policy certified by Mortgagor as complete and accurate, together with evidence
satisfactory to Mortgagee that the applicable premium has been prepaid.
(c) Successor's Rights. Any person who acquires title to the
Property or the Collateral upon foreclosure hereunder will succeed to all of
Mortgagor's rights under all policies of insurance maintained pursuant to this
section, including, without limitation, all rights to all claims under all such
insurance policies regardless of the nature of such claim or when such claim
arose.
4.6 Damages; Insurance and Condemnation Proceeds.
(a) The following (whether now existing or hereafter arising) are
all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the
request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of
damages and all other compensation payable directly or indirectly by reason of a
condemnation or proposed condemnation for public or private use affecting all or
any part of, or any interest in, the Property; (ii) all other claims and awards
for damages to, or decrease in value of, all or any part of, or any interest in,
the Property; (iii) all proceeds of any insurance policies payable by reason of
loss sustained to all or any part of the Property; and (iv) all interest which
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may accrue on any of the foregoing. Subject to applicable law, and without
regard to any requirement contained in Section 4.8(d) Mortgagee may at its
discretion apply all or any of the proceeds it receives to its expenses in
settling, prosecuting or defending any claim and may apply the balance to the
Secured Obligations in any order, and/or Mortgagee may release all or any part
of the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee
may commence, appear in, defend or prosecute any assigned claim or action and
may adjust, compromise, settle and collect all claims and awards assigned to
Mortgagee; provided, however, in no event shall Mortgagee be responsible for any
failure to collect any claim or award, unless such failure is due to the gross
negligence of Mortgagee.
(b) So long as no Default exists and is continuing, Mortgagee may
permit insurance or condemnation proceeds held by Mortgagee to be used for
repair or restoration but may condition such application upon reasonable
conditions, including, without limitation: (i) the deposit with Mortgagee of
such additional funds which Mortgagee determines are needed to pay all costs of
the repair or restoration, (including, without limitation, taxes, financing
charges, insurance and rent during the repair period); (ii) the establishment of
an arrangement for lien releases and disbursement of funds acceptable to
Mortgagee; (iii) the delivery to Mortgagee of plans and specifications for the
work, a contract for the work signed by a contractor acceptable to Mortgagee, a
cost breakdown for the work and a payment and performance bond for the work, all
of which shall be acceptable to Mortgagee; and (iv) the delivery to Mortgagee of
evidence acceptable to Mortgagee (aa) that after completion of the work, and
sufficient time has elapsed to re-lease the Property (but in no event longer
than six months after completion of the work), the income from the Property will
be sufficient to pay all expenses and debt service for the Property; (bb) of the
continuation of Leases acceptable to and required by Mortgagee; (cc) that upon
completion of the work, the size, capacity and total value of the Property will
be at least as great as it was before the damage or condemnation occurred; (dd)
that there has been no material adverse change in the financial condition or
credit of Mortgagor since the date of this Mortgage; and (ee) of the
satisfaction of any additional conditions that Mortgagee may reasonably
establish to protect its security. Mortgagor hereby acknowledges that the
conditions described above are reasonable, and, if such conditions have not been
satisfied or progress satisfactory to the Mortgagee made by Mortgagor in
achieving satisfaction of the conditions within ninety (90) days of receipt by
Mortgagee of such insurance or condemnation proceeds, then Mortgagee may apply
such insurance or condemnation proceeds to pay down principal of the Secured
Obligations in such order and amounts as Mortgagee in its sole discretion may
choose.
4.7 Maintenance and Repair of Property and Collateral. Mortgagor will
at all times maintain the Property and the Collateral in good condition and
repair, and will diligently prosecute the completion of any infrastructure,
building or other improvement which is at any time in the process of
construction on the Property in substantial compliance with all building codes
and other governmental requirements and in accordance with the Loan Agreement.
Mortgagor shall constantly maintain and shall not diminish in any respect nor
materially alter the Property during the term of this Mortgage, except as
required by law or municipal ordinance, without the prior written consent of
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Mortgagee, which consent shall not be unreasonably withheld, conditioned or
delayed. Mortgagor will promptly repair, restore, replace, or rebuild any part
of the Property or the Collateral which may be affected by any casualty or any
public or private taking or injury to the Property or the Collateral. Any
repair, restoration, replacement, or rebuilding shall be consistent with all
applicable laws and regulations. All costs and expenses arising out of the
foregoing shall be paid by Mortgagor whether or not the proceeds of any
insurance or eminent domain shall be sufficient therefor. Mortgagor will
substantially comply in all material respects with all statutes, ordinances, and
other governmental or quasi-governmental requirements and private covenants
relating to the ownership, construction, use, or operation of the Property and
the Collateral, including but not limited to any environmental or ecological
requirements, legislation or regulations with respect to the Americans With
Disabilities Act; provided, that so long as Mortgagor is not otherwise in
default hereunder, Mortgagor may, upon providing Mortgagee with security
reasonably satisfactory to Mortgagee, proceed diligently and in good faith to
contest the validity or applicability of any such statute, ordinance, or
requirement. Mortgagee and any person authorized by Mortgagee may enter and
inspect the Property at all reasonable times, and may inspect the Collateral,
wherever located, at all reasonable times, upon no less than twenty-four (24)
hours prior written notice (except in the event of an emergency).
4.8 Performance of Lease Obligations. Mortgagor will use commercially
reasonable efforts to keep the Property fully leased at rental rates prevailing
in the market and to perform, in all material respects, all of Mortgagor's
obligations under or in connection with each present and future lease of all or
any part of the Property ("Leases").
4.9 Liens, Encumbrances and Charges. Mortgagor shall immediately
discharge any lien not approved by Mortgagee in writing that has or may attain
priority over this Mortgage. Subject to the provisions of the Loan Agreement
regarding mechanics' liens, Mortgagor shall pay when due all obligations secured
by or reducible to liens and encumbrances which shall now or hereafter encumber
or appear to encumber all or any part of the Property or any interest therein,
whether senior or subordinate hereto.
4.10 Management. The Mortgagor will provide and maintain good and
efficient management of the Property satisfactory to Mortgagee. Mortgagor shall
obtain Mortgagee's advance written approval of any management provided, and of
any contract therefor or assignment thereof, which written approval shall not be
unreasonably withheld, conditioned or delayed.
4.11 Condemnation. Mortgagor hereby assigns, transfers and sets over
unto Mortgagee the entire proceeds of any award or any claim for damages for any
of the Property taken or damaged under the power of eminent domain or by
condemnation. Mortgagee may elect, in its discretion, to apply the proceeds of
the award upon or in reduction of the Secured Obligations, whether due or not.
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4.12 Mechanic's Liens. Mortgagor will keep the Property free and clear
of all stop notices, liens and claims of liens by contractors, subcontractors,
mechanics, laborers, materialmen, and other such persons in the manner provided
in the Loan Agreement.
4.13 Defense of Actions. At Mortgagor's sole expense, Mortgagor shall
protect, preserve and defend the Property and title to and right of possession
of the Property, the security hereof and the rights and powers of Mortgagee
hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt
notice in writing of the assertion of any claim, of the filing of any action or
proceeding, of the occurrence of any damage to the Property and of any
condemnation offer or action.
4.14 Inventories; Assembly of Tangible Personalty. Mortgagor will, from
time to time at the request of Mortgagee, supply Mortgagee with a current
inventory of the Tangible Personalty, in such detail as Mortgagee may require.
Upon the occurrence of any Event of Default hereunder, Mortgagor will, at
Mortgagee's request assemble the Tangible Personalty and make the Tangible
Personalty available to Mortgagee at any place designated by Mortgagee which is
reasonably convenient to both parties.
4.15 Further Assurances; Estoppel Certificates. Mortgagor will execute
and deliver to Mortgagee upon demand, and pay the costs of preparation and
recording thereof, any further documents which Mortgagee may reasonably request
to confirm or perfect the liens and security interests created or intended to be
created hereby, or to confirm or perfect any evidence of the Secured
Obligations. Mortgagor will also, within ten (10) days after any request by
Mortgagee, deliver to Mortgagee a signed and acknowledged statement certifying
to Mortgagee, or to any proposed transferee of the Secured Obligations, (a) the
balance of principal, interest, and other sums then outstanding under the Note,
and (b) whether Mortgagor claims to have any offsets or defenses with respect to
the Secured Obligations and, if so, the nature of such offsets or defenses.
4.16 Parking Requirements. Mortgagor shall maintain at all times
sufficient parking spaces to comply with the parking requirements of all Leases,
zoning and other regulations affecting the Property.
4.17 Financial Statements and Inspection of Records. Mortgagor, at
Mortgagor's expense, shall furnish to Mortgagee the financial and other reports
required by the Loan Agreement.
4.18 Security Deposits. Upon the occurrence of an Event of Default and
during its continuance, required by the Mortgagee, Mortgagor shall keep and
maintain in a separate Mortgagee account with Mortgagee, any security deposits
or advance payments received from tenants in lieu of security deposits. Upon the
Mortgagee's request, the Mortgagee shall be named on the Mortgagee account and
no funds shall be withdrawn therefrom without the prior written consent of the
Mortgagee.
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4.19 Environmental Representations and Warranties. Mortgagor and
Guarantor have executed for the benefit of the Mortgagee that certain
Environmental Indemnity Agreement of even date herewith ("EIA"), the provisions
of which are included herein by reference. Mortgagor shall comply with the terms
and provisions of the EIA.
ARTICLE V
MORTGAGOR'S NEGATIVE COVENANTS
5.1 Waste. Mortgagor will not commit or permit any waste with respect
to the Property or the Collateral.
5.2 Zoning and Private Covenants. Except as specifically provided in
the Loan Agreement, if at all, Mortgagor will not initiate, join in, or consent
to any change in any development order or development of regional impact, land
use plan designation, zoning ordinance or classification, any change in the
"zone lot" or "zone lots" (or similar zoning unit or units) presently comprising
the Property, any change in any private restrictive covenant, or any change in
any other public or private restriction limiting or defining the uses which may
be made of the Property or any part thereof, without the express written consent
of Mortgagee. If under applicable zoning provisions the use of all or any part
of the Property is or becomes a nonconforming use, Mortgagor will not cause such
use to be discontinued or abandoned without the express written consent of
Mortgagee.
5.3 Due On Sale Or Encumbrance. Except as provided in the Loan
Agreement, if the Property or any interest therein shall be sold, transferred
(including, without limitation, through sale or transfer of a majority or
controlling interest of the corporate stock or general partnership interests or
limited liability company interests of Mortgagor), mortgaged, assigned, further
encumbered or leased, whether directly or indirectly, whether voluntarily,
involuntarily or by operation of law, without the prior written consent of
Mortgagee, then Mortgagee, in its sole discretion, may declare all Secured
Obligations immediately due and payable.
5.4 Transfer or Removal of Tangible Personalty. Mortgagor will not
sell, transfer or remove from the Property all or any material part of the
Tangible Personalty, unless the items sold, transferred, or removed are
simultaneously replaced with similar items of equal or greater value.
5.5 Further Encumbrance of Collateral. Mortgagor will not make any
purchase or conditional sale, lease or agreement under which title is reserved
in the vendor of any Collateral to be placed in or upon any of the buildings or
improvements on the said Property; nor create or permit any junior lien,
security interest or other encumbrance against the Collateral without the prior
written consent of Mortgagee.
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5.6 Change of Name. Mortgagor will not change the name under which
Mortgagor does business, or adopt or begin doing business under any other name
or assumed or trade name, without first notifying Mortgagee of Mortgagor's
intention to do so and delivering to Mortgagee such executed modifications or
supplements of this Mortgage (and to any financing statement which may be filed
in connection herewith) as Mortgagee may require, except as specifically
permitted in the Loan Agreement.
5.7 Improper Use of Property or Collateral. Mortgagor will not use the
Property or the Collateral for any purpose or in any manner, or take any action
with respect to the Property which violates any applicable law, ordinance, or
other governmental requirement, the requirements or conditions of any insurance
policy, or any private covenant.
5.8 Right Of Inspection. Mortgagee, its agents and employees, may enter
the Property at any reasonable time for the purpose of inspecting the Property
and ascertaining Mortgagor's compliance with the terms hereof.
ARTICLE VI
DEFAULT PROVISIONS
Each of the following events will constitute a default (an "Event of
Default") under this Mortgage and under each of the other Loan Documents:
6.1 Failure to Pay. Default shall be made in the payment of any
installment of principal or interest on the Note or any other sum under the Loan
Documents when due (after giving consideration to (a) any grace period which may
be applicable under such document and (b) any notice which may be required under
such document).
6.2 Loan Agreement. The occurrence of an Event of Default under the
Loan Agreement.
6.3 Cross Default. A default under that certain Deed of Trust, Security
Agreement, Financing Statement and Assignment of Rents and Revenues, dated of
even date herewith, executed by AIOP Lost Dutchman Notes, L.L.C., which secures
the Note and encumbers property situated in the County of Maricopa, State of
Arizona, and such default is not cured within the applicable cure periods, if
any.
6.4 Voluntary Bankruptcy. Mortgagor, or Mortgagor's general partner
shall file a voluntary petition in bankruptcy or shall be adjudicated a
bankruptcy or insolvent, or shall file any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief for itself under any present or
future federal, state, or other statute, law, or regulation relating to
bankruptcy, insolvency, or other relief for debtors or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver, or liquidator of
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Mortgagor or Mortgagor's general partner, or of all or any part of the Property,
or of any or all of the royalties, revenues, rents, issues, or profits thereof,
or shall make any general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due.
6.5 Involuntary Bankruptcy. A court of competent jurisdiction shall
enter an order, judgment, or decree approving a petition filed against
Mortgagor, Mortgagor's general partner seeking any reorganization, dissolution,
or similar relief under any present or future federal, state, or other statute,
law, or regulation relating to bankruptcy, insolvency, or other relief for
debtors, and such order, judgment, or decree shall remain unvacated and unstayed
for an aggregate of 60 days (whether or not consecutive) from the first date of
entry thereof; or any trustee, receiver, or liquidator of Mortgagor, Mortgagor's
general partner or of all or any part of the Property, or of any or all of the
royalties, revenues, rents, issues, or profits thereof, shall be appointed
without the consent or acquiescence of Mortgagor, Mortgagor's general partner,
and such appointment shall remain unvacated and unstayed for an aggregate of 60
days (whether or not consecutive).
6.6 Judgment. A writ of execution or attachment or any similar process
shall be issued or levied against all or any part of or interest in the Property
or a material part of the Collateral, or any judgment involving monetary damages
shall be entered against Mortgagor Mortgagor's general partner, which shall
become a lien on the Property or any portion thereof or interest therein and
such execution, attachment, or similar process or judgment is not released,
bonded, satisfied, vacated, or stayed within 60 days after its entry or levy.
6.7 Superior Lien Against the Property. The assertion of any claim of
priority over this Mortgage, by title, lien, or otherwise in any legal,
administrative, or equitable proceeding, unless such assertion be withdrawn, or
effective action satisfactory to Mortgagee commenced (and thereafter diligently
prosecuted) and Mortgagee is secured against any loss or damage therefrom,
within 30 days of the assertion of such claim.
6.8 Abandonment. The actual or constructive abandonment of all or a
substantial portion of the Property or the Collateral (such abandonment
constituting an assignment to Mortgagee, at Mortgagee's option, of Mortgagor's
interest in any lease or contract now or hereafter affecting the abandoned
property).
6.9 Valid First Lien. The failure of Mortgagee to have a valid first
lien against the entire Property and Collateral as to all advances made now or
at any time in the future pursuant to the Note, this Mortgage, or any other Loan
Documents.
6.10 Breach of Covenant. Mortgagor's failure to keep, observe, perform,
carry out, and execute in every particular the covenants, agreements,
obligations, and conditions (other than those set out in Sections 6.1 through
6.9, above) set out in this Mortgage, the Note, the Loan Agreement, and any
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other Loan Document executed by Mortgagor in connection with or as security for
the Note, unless such failure is cured to Mortgagee's satisfaction following
written notice by Mortgagee to Mortgagor of such failure. Such notice shall be
titled "Notice of Default" and shall specify the default and, if curable, the
time for cure of such default set forth in the Loan Documents, and if no time
for cure is specified in the Loan Documents, the time for cure shall be 30 days;
provided, however, an Event of Default shall not be deemed to have occurred if
the Default is not curable within the applicable cure period so long as the
Mortgagor promptly gives written notice to the Mortgagee describing the
Mortgagor's plan of cure and schedule to cure and commences such cure within
thirty (30) days of notice of Default, and diligently pursues the cure to
completion within ninety (90) days of the notice of Default. The Notice of
Default may be sent simultaneously with or in lieu of any other default notice
necessary to initiate a grace or cure period under this Mortgage or any other
Loan Document.
6.11 Rights and Remedies. At any time after an Event of Default,
Mortgagee shall each have all the following rights and remedies:
(a) With or without notice, to declare all Secured Obligations
immediately due and payable;
(b) With or without notice, and without releasing Mortgagor from
any Secured Obligation, and without becoming a mortgagee in possession, to cure
any breach or Default of Mortgagor and, in connection therewith, to enter upon
the Property and do such acts and things as Mortgagee deems necessary or
desirable to protect the security hereof, including, without limitation: (i) to
appear in and defend any action or proceeding purporting to affect the security
of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii)
to pay, purchase, contest or compromise any encumbrance, charge, lien or claim
of lien which, in the sole judgment of either Mortgagee, is or may be senior in
priority to this Mortgage, the judgment of Mortgagee being conclusive as between
the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or
charges with respect to insurance required to be carried under this Mortgage; or
(v) to employ counsel, accountants, contractors and other appropriate persons.
(c) To commence and maintain an action or actions in any court of
competent jurisdiction to foreclose this instrument as a mortgage or to obtain
specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor
agrees that such covenants shall be specifically enforceable;
(d) To apply to a court of competent jurisdiction for and obtain
appointment of a receiver of the Property as a matter of strict right and
without regard to the adequacy of the security for the repayment of the Secured
Obligations, the existence of a declaration that the Secured Obligations are
immediately due and payable, or the filing of a notice of default, and Mortgagor
hereby consents to such appointment;
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(e) To enter upon, possess, manage and operate the Property or any
part thereof, to take and possess all documents, books, records, papers and
accounts of Mortgagor or the then owner of the Property, to make, terminate,
enforce or modify Leases of the Property upon such terms and conditions as
Mortgagee deems proper, to make repairs, alterations and improvements to the
Property as necessary, in Mortgagee's sole judgment, to protect or enhance the
security hereof;
(f) To execute a written notice of such Event of Default and of its
election to cause the Property to be sold to satisfy the Secured Obligations. As
a condition precedent to any such sale, Mortgagee shall give and record such
notice as the law then requires and shall comply with the laws of the State of
Florida regarding foreclosure of the liens and security interest created under
this Mortgage and the Loan Documents. To the extent and in the manner provided
by law, Mortgagee shall be entitled to cause the Property to be sold at the time
and place of sale fixed by it in the notice of sale, at one or several sales,
either as a whole or in separate parcels and in such manner and order, all as
Mortgagee in its sole discretion may determine, at public auction to the highest
bidder for cash, in lawful money of the United States, payable at time of sale.
Neither Mortgagor nor any other person or entity other than Mortgagee shall have
the right to direct the order in which the Property is sold. Subject to
requirements and limits imposed by law, Mortgagee may from time to time postpone
or cause the postponement of the sale of all or any portion of the Property by
public announcement at such time and place of sale. At the conclusion of any
foreclosure sale, the officer conducting the sale shall execute and deliver to
the purchaser at the sale a certificate of purchase which shall describe the
property sold to such purchaser and shall state that upon the expiration of the
applicable periods for redemption, the holder of such certificate will be
entitled to a deed to the property described in the certificate. After the
expiration of all applicable periods of redemption, unless the property sold has
been redeemed by Mortgagor, the officer who conducted such sale shall, upon
request, execute and deliver an appropriate deed to the holder of the
certificate of purchase or the last certificate of redemption, as the case may
be. The recitals in the deed of any matters or facts shall be conclusive proof
of the truthfulness thereof. Any person, including Mortgagor or Mortgagee, may
purchase at the sale. Nothing contained in this Mortgage shall be construed to
limit or enlarge the rights of Mortgagee to cause the foreclosure of this
Mortgage under the laws of the State of Florida;
(g) To resort to and realize upon the security hereunder and any
other security now or later held by Mortgagee concurrently or successively and
in one or several consolidated or independent judicial actions or lawfully taken
non-judicial proceedings, or both, and to apply the proceeds received upon the
Secured Obligations all in such order and manner as Mortgagee determines in its
sole discretion.
(h) Upon sale of the Property at any judicial or non-judicial
foreclosure, Mortgagee may credit bid (as determined by Mortgagee in its sole
and absolute discretion) all or any portion of the Secured Obligations. In
determining such credit bid, Mortgagee may, but is not obligated to, take into
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account all or any of the following: (i) appraisals of the Property as such
appraisals may be discounted or adjusted by Mortgagee in its sole and absolute
underwriting discretion; (ii) expenses and costs incurred by Mortgagee with
respect to the Property prior to foreclosure; (iii) expenses and costs which
Mortgagee anticipates will be incurred with respect to the Property after
foreclosure, but prior to resale, including, without limitation, costs of
structural reports and other due diligence, costs to carry the Property prior to
resale, costs of resale (e.g. commissions, attorneys' fees, and taxes), costs of
any hazardous materials clean-up and monitoring, costs of deferred maintenance,
repair, refurbishment and retrofit, costs of defending or settling litigation
affecting the Property, and lost opportunity costs (if any), including the time
value of money during any anticipated holding period by Mortgagee; (iv)
declining trends in real property values generally and with respect to
properties similar to the Property; (v) anticipated discounts upon resale of the
Property as a distressed or foreclosed property; (vi) the fact of additional
collateral (if any), for the Secured Obligations; and (vii) such other factors
or matters that Mortgagee (in its sole and absolute discretion) deems
appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w)
Mortgagee is not required to use any or all of the foregoing factors to
determine the amount of its credit bid; (x) this Section does not impose upon
Mortgagee any additional obligations that are not imposed by law at the time the
credit bid is made; (y) the amount of Mortgagee's credit bid need not have any
relation to any loan-to-value ratios specified in the Loan Documents or
previously discussed between Mortgagor and Mortgagee; and (z) Mortgagee's credit
bid may be (at Mortgagee's sole and absolute discretion) higher or lower than
any appraised value of the Property.
6.12 Enforcement of Security Interests. Mortgagee may exercise all
rights of a secured party under the Uniform Commercial Code with respect to the
Collateral, including but not limited to taking possession of, holding, and
selling the Collateral and enforcing or otherwise realizing upon any accounts
and general intangibles. Any requirement for reasonable notice of the time and
place of any public sale, or of the time after which any private sale or other
disposition is to be made, will be satisfied by Mortgagee's giving of such
notice to Mortgagor at least 15 days prior to the time of any public sale or the
time after which any private sale or other intended disposition is to be made.
If permitted by statute or court decision, the Collateral may be sold by the
Mortgagee as part of the foreclosure sale of the Property.
6.13 Application of Foreclosure Sale Proceeds. After deducting all
reasonable costs, fees and expenses of any receiver, and of this trust,
including, without limitation, cost of evidence of title and attorneys' fees in
connection with sale and costs and expenses of sale and of any judicial
proceeding wherein such sale may be made, Mortgagee shall apply all proceeds of
any foreclosure sale: (a) to payment of all sums expended by Mortgagee under the
terms hereof and not then repaid, with accrued interest at the rate of interest
specified in the Note to be applicable on or after maturity or acceleration of
the Note; (b) to payment of all other Secured Obligations; and (c) the
remainder, if any, to the person or persons legally entitled thereto.
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6.14 Foreclosure Laws. Nothing in this section dealing with foreclosure
procedures or specifying particular actions to be taken by Mortgagee or any
officer conducting the foreclosure sale shall be deemed to contradict or add to
the requirements and procedures now or hereafter specified by Florida law, and
any such inconsistency shall be resolved in favor of Florida law applicable at
the time of foreclosure.
6.15 Application of Other Sums. All sums received by Mortgagee under
Section 6.11 or Section 6.12, less all reasonable costs and expenses incurred by
Mortgagee or any receiver under Section 6.13 or Section 7.2, including, without
limitation, attorneys' fees, shall be applied in payment of the Secured
Obligations in such order as Mortgagee shall determine in its sole discretion;
provided, however, Mortgagee shall have no liability for funds not actually
received by Mortgagee.
6.16 No Cure or Waiver. Neither Mortgagee's nor any receiver's entry
upon and taking possession of all or any part of the Property, nor any
collection of rents, issues, profits, insurance proceeds, condemnation proceeds
or damages, other security or proceeds of other security, or other sums, nor the
application of any collected sum to any Secured Obligation, nor the exercise or
failure to exercise of any other right or remedy by Mortgagee or any receiver
shall cure or waive any breach, Default or notice of default under this
Mortgage, or nullify the effect of any notice of default or sale (unless all
Secured Obligations then due have been paid and performed and Mortgagor has
cured all other defaults), or impair the status of the security, or prejudice
Mortgagee in the exercise of any right or remedy, or be construed as an
affirmation by Mortgagee of any tenancy, lease or option or a subordination of
the lien of this Mortgage.
6.17 Payment of Costs, Expenses and Attorneys' Fees. Mortgagor agrees
to pay to Mortgagee upon thirty (30) days' written notice from Mortgagee, all
reasonable costs and expenses incurred by Mortgagee pursuant to Section 6.2,
including, without limitation the costs of any appraisals, engineering or
environmental testing and evaluations of the Property obtained by Mortgagee, all
costs of any receivership for the Property advanced by Mortgagee, and all
attorneys', legal assistants' and consultants' fees, expert's evidence,
stenographer's charges, publication costs, (which may be estimated as to items
to be expended after foreclosure sale or entry of the decree) costs of procuring
all such abstracts of title, title searches, title insurance policies, and
similar data with respect to title as Mortgagee may deem reasonably necessary
either to prosecute such suit or to evidence to bidders at any sale the true
condition of title to or value of the Property, incurred by Mortgagee, shall
constitute a part of the Secured Obligations and may be included as part of the
amount owing from Mortgagor to Mortgagee at any foreclosure sale, with interest
from the date of expenditure until said sums have been paid at the rate of
interest then applicable to the principal balance of the Note as specified
therein.
6.18 Power to File Notices and Cure Defaults. Upon the occurrence of an
Event of Default, Mortgagor hereby irrevocably appoints Mortgagee and its
successors and assigns, as its attorney-in-fact, which agency is coupled with an
interest, (a) to execute and/or record any notices of completion, cessation of
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labor, or any other notices that Mortgagee deems appropriate to protect
Mortgagee's interest, (b) upon the issuance of a deed pursuant to the
foreclosure of this Mortgage or the delivery of a deed in lieu of foreclosure,
to execute all instruments of assignment or further assurance with respect to
the Leases and Income in favor of the grantee of any such deed, as may be
necessary or desirable for such purpose, (c) to prepare, execute and file or
record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve
Mortgagee's security interests and rights in or to any of the Collateral, and
(d) upon the occurrence of an event, act or omission which, with notice or
passage of time or both, would constitute a Default, Mortgagee may perform any
obligation of Mortgagor hereunder; provided, however, that: (i) Mortgagee as
such attorney-in-fact shall only be accountable for such funds as are actually
received by Mortgagee; and (ii) Mortgagee shall not be liable to Mortgagor or
any other person or entity for any failure to act under this Section.
ARTICLE VII
RECEIVER
7.1 Appointment of Receiver. To the extent permitted by law, upon the
occurrence of a Default, Mortgagee shall be entitled, as a matter of absolute
right and without regard to the value of any security for the Secured
Obligations or the solvency of any person liable therefor, to the appointment of
a receiver for the Property, the Leases, and the Income upon ex parte
application to any court of competent jurisdiction. Mortgagor waives any right
to any hearing or notice of hearing prior to the appointment of a receiver.
7.2 Right to Make Repairs, Improvements. Should any part of the
Property come into the possession of Mortgagee or a receiver, whether before or
after an Event of Default, Mortgagee or the receiver and receiver's agents shall
be empowered:
(a) To take possession of the Property, Leases, Income and any
business conducted by Mortgagor or any other person thereon and any business
assets used in connection therewith and any Property in which Mortgagee has a
security interest granted by Mortgagor and, if the receiver deems it
appropriate, to operate the same;
(b) To exclude Mortgagor and Mortgagor's agents, servants, and
employees from the Property;
(c) With or without taking possession of the Property, to collect
the Income, including those past due and unpaid and security deposits;
(d) To rent, lease or let all or any portion of the Property to any
party or parties at such rental and upon such terms as the Mortgagee shall, and
to pay any leasing or rental commissions associated therewith in its discretion,
determine;
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(e) To continue the development, marketing and sale of the Property
or any portion thereof;
(f) To complete any construction or development which may be in
progress;
(g) To do such maintenance and make such repairs and alterations as
the receiver deems necessary;
(h) To use all stores of materials, supplies and maintenance
equipment on the Property and to replace and replenish such items at the expense
of the receivership estate;
(i) To pay the operating expenses of the Property, including costs
of management and leasing or marketing thereof (which shall include lease
commissions, sale commissions), payments under contracts and agreements for
development and construction;
(j) To pay all taxes and assessments against the Property and any
property which is collateral for the Secured Obligations, all premiums for
insurance thereon, all utility and other operating expenses, and all sums due
under any prior or subsequent encumbrance;
(k) To borrow from the Mortgagee such funds as may be reasonably
necessary to the effective exercise of the receiver's powers, on such terms as
may be agreed upon by the receiver and the Mortgagee; and
(l) Generally do anything which Mortgagor could legally do if
Mortgagor were in possession of the Property.
All expenses incurred by the receiver or the receiver's agent shall constitute
part of the Secured Obligations. Any revenues collected by the receiver shall be
applied first to the expenses of the receivership (including attorneys' fees
incurred by the receiver and by Mortgagee), to expenses of the Property, and to
preserve, protect, maintain and operate the Property and any other collateral
which is security for the Secured Obligations, and the balance shall be applied
toward the Secured Obligations or any deficiency which may result from any
foreclosure sale, and then in such other manner as the court may direct. Unless
sooner terminated with the express consent of the Mortgagee, any such
receivership will continue until all amounts remaining due under the Note have
been discharged in full, or until title to the Property has passed after
foreclosure sale and all applicable periods of redemption have expired, and in
either case, the court has discharged the receiver. Mortgagor covenants to
promptly reimburse and pay to Mortgagee or such receiver, at the place where the
Note is payable, or at such other place as may be designated in writing, the
amount of all reasonable expenses (including the cost of any insurance, taxes,
or other charges) incurred by Mortgagee or such receiver in connection with its
custody, preservation, use or operation of the Property, together with interest
thereon from the date incurred by Mortgagee or such receiver at the then
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applicable interest rate, as set forth in the Note, and all such expenses,
costs, taxes, interest, and other charges shall be part of the Secured
Obligations. It is agreed, however, that the risk of accidental loss or damage
to the Property is undertaken by Mortgagor and, except for Mortgagee's or such
receiver's willful misconduct or gross negligence, Mortgagee or such receiver
shall have no liability whatsoever for decline in value of the Property, for
failure to obtain or maintain insurance, or for failure to determine whether any
insurance ever in force is adequate as to amount or as to the risks insured, or
to complete development.
ARTICLE VIII
ASSIGNMENT OF RENTS AND REVENUES
8.1 Assignment of Rents and Revenues. To further secure the Secured
Obligations, Mortgagor does hereby sell, assign and transfer unto the Mortgagee
(a) all rental and tenancy agreements now or hereafter affecting the Property
("Leases"), (b) all rents, common area charges, tax payments, insurance premiums
and any other payments due to Landlord as a consequence of the use of the
Property, now due or which may hereafter become due under of by virtue of any
Leases, (c) all Income, and (d) any and all future Leases, whether written or
oral, with all security therefor, including all guaranties thereof, now or
hereafter affecting the possession, use and enjoyment of the Property
(collectively "Rents and Revenues"). The Mortgagor does hereby appoint
irrevocably the Mortgagee its true and lawful attorney in its name and stead
(with or without taking possession of the Property) to rent, lease or let any
improvements located on the Property upon the occurrence of, and during the
continuation of, a Default, and upon such terms as said Mortgagee shall, in its
discretion, determine, and to collect all of said Rents and Revenues arising
from or accruing at any time hereafter, and all now due or that may hereafter
become due under each and every of the Leases, or other agreements, written or
verbal, or which may hereafter exist on the Property, on the condition that
Mortgagee hereby grants to Mortgagor a license to collect and retain such Rents
and Revenues prior to the occurrence of any Event of Default under the Loan
Documents. Mortgagor expressly covenants to apply the Rents and Revenues
received, after application for operating expenses permitted hereunder, to
payment of the Secured Obligations as and when the same become due and in
compliance with the Loan Documents. Such license shall be revocable by Mortgagee
upon written notice to Mortgagor at any time after an Event of Default under the
Loan Documents, and immediately upon any such revocation, Mortgagee shall be
entitled to receive, and Mortgagor shall deliver to Mortgagee, any and all Rents
and Revenues theretofore collected by Mortgagor which remain in the possession
or control of Mortgagor and all Leases, and other such agreements. In addition
(and not as an election of remedies), at any time after an Event of Default,
Mortgagee may exercise all rights permitted under Florida Statutes Section
697.07, including applying for a court order requiring Mortgagor to deposit all
rents in the court registry, and Mortgagor consents to the entry of such an
order upon the sworn ex parte motion of Mortgagee that a Default has occurred
hereunder. It is the intention of the Mortgagor to create and grant, and it is
the intention of Mortgagee to create and receive, a present and absolute
assignment of all of the Leases, similar agreements, Rents and Revenues now due
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or which may hereafter become due, but it is agreed that the Mortgagee's right
to collect the Rents and Revenues is conditioned upon the existence of an Event
of Default under the Loan Documents. Failure of Mortgagee at any time or from
time to time to enforce its rights under this ARTICLE 8 shall not in any manner
prevent its subsequent enforcement, and Mortgagee is not obligated to collect
anything hereunder, but is accountable only for sums collected. Nothing
contained herein shall be construed as constituting the Mortgagee a mortgagee in
possession in the absence of the taking of actual possession of the Property by
the Mortgagee pursuant to Section 8.7 (Mortgagee's Right of Possession In Case
of Default) hereof. In the exercise of the powers herein granted to the
Mortgagee, no liability shall be asserted or enforced against the Mortgagee, all
such liability being expressly waived and released by Mortgagor.
8.2 Covenants Regarding Leases. Mortgagor agrees:
(a) Not to execute any Leases which affect the Property except on
the form approved by the Mortgagee, without the prior written consent of
Mortgagee.
(b) Not to execute any other assignments of said Leases or any
interest therein or any of the Rents and Revenues thereunder;
(c) That notwithstanding any variation of the terms of the Mortgage
or any extension of time for payment thereunder or any release of part or parts
of the Property, the Leases, Rents and Revenues hereby assigned, insofar as they
relate to the unreleased Property, shall continue as additional security in
accordance with the terms hereof; and
(d) To hold and account for all security deposits in the manner
provided for under any state or local laws or ordinances applicable to the
Property or under the Loan Documents; and (e) To perform all of the Mortgagor's
covenants and agreements under the Leases and not to suffer or permit to occur
any release of liability of the lessees except in the exercise of its business
judgment as a prudent landlord.
8.3 Representations Regarding Leases. Mortgagor represents and warrants
(a) that, the Leases, if any, are in full force and effect; (b) that the Leases
and the Rents and Revenues thereunder have not been heretofore sold, assigned,
transferred, or set over by Mortgagor or by any person or persons whatsoever;
(c) that no material default exists on the part of the lessees thereunder, or
the Mortgagor as lessor; (d) that the payment of none of the Rents have been or,
except to the extent otherwise prudent under customary commercial standards
exercised in the ordinary course of business will be waived, released, reduced,
discounted or otherwise discharged or compromised by the Mortgagor directly or
indirectly by assuming any lessee's obligations with respect to other premises;
(e) Mortgagor has good right to sell, assign, transfer, and set over the same
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and to grant to and confer upon Mortgagee the rights, interests, powers, and
authorities herein granted and conferred.
8.4 Further Assignments. Mortgagor shall give Mortgagee at any time
upon demand any further or additional forms of assignment of transfer of such
Rents and Revenues, Leases, and security as may be reasonably requested by
Mortgagee, and shall deliver to Mortgagee executed copies of all such leases and
security.
8.5 Authority of Mortgagee. Any tenants or occupants of any part of the
Property are hereby authorized to recognize the claims of Mortgagee hereunder
without investigating the reason for any action taken by Mortgagee, or the
validity or the amount of indebtedness owing to Mortgagee, or the existence of a
Default or Event of Default under any Loan Document, or the application to be
made by Mortgagee of any amounts to be paid to Mortgagee. The sole signature of
Mortgagee or a receiver shall be sufficient for the exercise of any rights under
this ARTICLE 8 and the sole receipt of Mortgagee or a receiver for any sums
received shall be a full discharge and release therefor to any such tenant or
occupant of the Property; and Mortgagor hereby releases each such tenant and
occupant or purchaser which makes payments to Mortgagee under this ARTICLE 8
from any liability under the applicable Lease or occupancy agreement or
Contract. Checks for all or any part of the rentals collected under this ARTICLE
8 shall be drawn to the exclusive order of Mortgagee or such receiver.
8.6 Indemnification of Mortgagee. Nothing herein contained shall be
deemed to obligate Mortgagee to perform or discharge any obligation, duty, or
liability of lessor under any Lease of the Property, and Mortgagor shall and
does hereby indemnify and hold Mortgagee harmless from any and all liability,
loss, or damage which Mortgagee may or might incur under any Lease of the
Property or by reason of this assignment; and any and all such liability, loss,
or damage incurred by Mortgagee, together with the costs and expenses, including
reasonable attorneys' fees, incurred by Mortgagee in defense of any claims or
demands therefor (whether successful or not), shall be additional Secured
Obligations, and Mortgagor shall reimburse Mortgagee therefor on demand.
8.7 Mortgagee's Right of Possession in Case of an Event of Default. In
any case in which under the provision of this Mortgage, the Mortgagee has a
right to institute foreclosure proceedings, whether before or after the whole
principal sum secured hereby is declared to be immediately due, or whether
before or after the institution of legal proceedings to foreclose the lien
hereof or before or after sale thereunder, promptly upon demand of Mortgagee,
Mortgagor shall surrender to Mortgagee and Mortgagee shall be entitled to take
actual possession of the Property or any part thereof personally, or by its
agents or attorneys, as for condition broken, and Mortgagee in its discretion
may, with or without force and with or without process of law, enter upon and
take and maintain possession of all or any part of the Property, together with
all documents, books, records, papers and accounts of the Mortgagor or then
owners of the Property relating thereto, and may exclude the Mortgagor, its
agents or servants, wholly therefrom and may, as attorney-in-fact or agent of
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the Mortgagor, or in its own name as Mortgagee and under the powers herein
granted, hold, operate, manage and control the Property and conduct the
business, if any, thereof, either personally or by its agents, and with full
power to use such measures, legal or equitable, as in its discretion or in the
discretion of its successors or assigns may be deemed proper or necessary to
enforce the payment or security of the rents, issues, revenues and profits of
the Property.
8.8 Severability and Survival. The provisions of this ARTICLE 8 shall
survive the foreclosure of the lien of this Mortgage and the exercise of the
power of sale granted under this Mortgage until the expiration of all periods of
redemption following any such foreclosure or sale and thereafter with respect to
all Rents and Revenues arising prior to or attributable to the period prior to
the expiration of all such redemption periods.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Time of the Essence. Time is of the essence with respect to all
provisions of this Mortgage.
9.2 Rights and Remedies Cumulative. Mortgagee's rights and remedies
under each of the Loan Documents are cumulative of the rights and remedies
available to Mortgagee under each of the other Loan Documents and those
otherwise available to Mortgagee at law or in equity. No act of Mortgagee shall
be construed as an election to proceed under any particular provision of any
Loan Document to the exclusion of any other provision in the same or any other
Loan Document, or as an election of remedies to the exclusion of any other
remedy which may then or thereafter be available to Mortgagee.
9.3 No Implied Waivers. Mortgagee shall not be deemed to have waived
any provision of this Mortgage unless such waiver is in writing and is signed by
Mortgagee. Without limiting the generality of the preceding sentence, neither
Mortgagee's acceptance of any payment with knowledge of a default by Mortgagor,
nor any failure by Mortgagee to exercise any remedy following a default by
Mortgagor shall be deemed a waiver of such default, and no waiver by Mortgagee
of any particular default on the part of Mortgagor shall be deemed a waiver of
any other default or of any similar default in the future.
9.4 No Third Party Rights. No person shall be a third party Mortgagee
of any provision of this Mortgage. All provisions of this Mortgage favoring
Mortgagee are intended solely for the benefit of Mortgagee, and no third party
shall be entitled to assume or expect that Mortgagee will or will not waive or
consent to modification of any such provision in Mortgagee's sole discretion.
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9.5 Preservation of Liability and Priority. Without affecting the
liability of Mortgagor or of any other person (except a person expressly
released in writing) for payment and performance of all of the Secured
Obligations, and without affecting the rights of Mortgagee with respect to any
security not expressly released in writing, and without impairing in any way the
priority of this Mortgage over the interests of any person acquired or first
evidenced by recording subsequent to the recording hereof, Mortgagee may, either
before or after the maturity of the Note, and without notice or consent: (a)
release any person liable for payment or performance of all or any part of the
Secured Obligations; (b) make any agreement altering the terms of payment or
performance of all or any of the Secured Obligations; (c) exercise or refrain
from exercising, or waive, any right or remedy which Mortgagee may have under
any of the Loan Documents; (d) accept additional security of any kind for any of
the Secured Obligations; or (e) release or otherwise deal with any real or
personal property securing the Secured Obligations. Any person acquiring or
recording evidence of any interest of any nature in the Property or the
Collateral shall be deemed, by acquiring such interest or recording any evidence
thereof, to have agreed and consented to any or all such actions by Mortgagee.
9.6 Subrogation of Mortgagee. Mortgagee shall be subrogated to the lien
of any previous encumbrance discharged with funds advanced by Mortgagee under
the Loan Documents, regardless of whether such previous encumbrance has been
released of record.
9.7 Notices. Any notice required or permitted to be given by Mortgagor
or Mortgagee under this Mortgage shall be in writing and will be deemed given
(a) upon personal delivery or upon confirmed transmission by telecopier or
similar facsimile transmission device, (b) on the first business day after
receipted delivery to a courier service which guarantees next-business-day
delivery, or (c) on the third business day after mailing, by registered or
certified United States mail, postage prepaid, in any case to the appropriate
party at its address set forth below:
If to Mortgagor:
Asset Investors Operating Partnership, L.P.
3410 South Galena Street, Suite 210
Denver, Colorado 80231
Attention: David M. Becker
Telecopy No.: 303-614-9401
28
<PAGE>
With a copy to:
Joseph Gaynor, Esq.
Brandywine Real Estate Management Services Corporation
2637 McCormick Drive
Clearwater, Florida 33759-1041
Telecopy No.: 727-791-7920
If to Mortgagee:
U. S. Bank National Association
918 17th Street, Fifth Floor
Denver, Colorado 80202
Attention:Cyd Petre, Vice President
Telecopy No.: 303-585-4198
With a copy to:
Gorsuch Kirgis LLP
Tower I, Suite 1000
1515 Arapahoe Street
Denver, CO 80202
Attention: Connie B. Hyde, Esq.
Telecopy No.: 303-376-5001
Any person may change such person's address for notices or copies of notices by
giving notice to the other party in accordance with this section.
9.8 Further Assurances. Upon issuance of a deed or deeds pursuant to
foreclosure of this Mortgage, all right, title, and interest of the Mortgagor in
and to the Leases shall, by virtue of this instrument, thereupon vest in and
become the absolute property of the grantee or grantees in such deed or deeds
without any further act or assignment by the Mortgagor. Mortgagor hereby agrees
to execute all instruments of assignment or further assurance in favor of such
grantee or grantees in such deed or deeds, as may be necessary or desirable for
such purpose.
9.9 Defeasance. Upon payment and performance in full of all the Secured
Obligations and all costs of releasing this Mortgage, Mortgagee will execute and
deliver to Mortgagor such documents as may be required to release this Mortgage
of record.
9.10 Illegality. If any provision of this Mortgage is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Mortgage, the legality, validity, and enforceability of the
remaining provisions of this Mortgage shall not be affected thereby, and in lieu
of each such illegal, invalid or unenforceable provision there shall be added
29
<PAGE>
automatically as a part of this Mortgage a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable. If the rights and liens created by this Mortgage shall
be invalid or unenforceable as to any part of the Secured Obligations, then the
unsecured portion of the Secured Obligations shall be completely paid prior to
the payment of the remaining and secured portion of the Secured Obligations, and
all payments made on the Secured Obligations shall be considered to have been
paid on and applied first to the complete payment of the unsecured portion of
the Secured Obligations.
9.11 Obligations Binding Upon Mortgagor's Successors. This Mortgage is
binding upon Mortgagor and Mortgagor's successors and assigns, including all
grantees and remote grantees of any interest of Mortgagor in the Property, and
shall inure to the benefit of Mortgagee, and its successors and assigns, and the
provisions hereof shall likewise be covenants running with the land. The duties,
covenants, conditions, obligations, and warranties of Mortgagor in this Mortgage
shall be joint and several obligations of Mortgagor and Mortgagor's successors
and assigns.
9.12 Merger. No merger shall occur as a result of Mortgagee's acquiring
any other estate in, or any other lien on, the Property unless Mortgagee
consents to a merger in writing.
9.13 Governing Law. THIS AGREEMENT AND THE LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO (WITHOUT GIVING EFFECT TO COLORADO'S PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT (A) OF PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING ONLY TO THE CREATION, PERFECTION, FORECLOSURE AND ENFORCEMENT
OF RIGHTS AND REMEDIES AGAINST SPECIFIC COLLATERAL, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED (THE
"COLLATERAL STATE"), AND (B) THAT THE LAWS OF THE UNITED STATES OF AMERICA AND
ANY RULES REGULATIONS, OR ORDERS ISSUED OR PROMULGATED THEREUNDER, APPLICABLE TO
THE AFFAIRS AND TRANSACTIONS ENTERED INTO BY THE MORTGAGEE, OTHERWISE PREEMPT
COLLATERAL STATE LAW OR COLORADO LAW; IN WHICH EVENT SUCH FEDERAL LAW SHALL
CONTROL. MORTGAGOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY COLORADO OR FEDERAL COURT SITTING IN DENVER, COLORADO (OR ANY STATE IN
WHICH THE PROPERTY IS LOCATED) OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS.
30
<PAGE>
9.14 Survival. This Mortgage shall survive foreclosure of the liens
created hereby, to the extent necessary to fulfill its purposes.
9.15 Captions. The captions and headings of various paragraphs of this
Mortgage are for convenience only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.
Signed and delivered as of the date first mentioned above.
MORTGAGOR:
COMMUNITY SAVANNA CLUB JOINT VENTURE,
a Delaware general partnership
By: AIOP FLORIDA PROPERTIES I, L.L.C.,
a Delaware limited liability
company, Managing General Partner
By: ASSET INVESTORS OPERATING
PARTNERSHIP, L.P., a Delaware
limited partnership, Sole Member
and Manager
By: ASSET INVESTORS CORPORATION,
a Delaware corporation,
General Partner
By: /s/David M. Becker
--------------------------
David M. Becker
Chief Financial Officer
31
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Florida Properties I, L.L.C., as Managing General Partner of
Community Savanna Club Joint Venture, a Delaware general partnership.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
------------------------
Notary Public
( S E A L )
32
<PAGE>
WITNESSES:
/s/Pam J. Finch
- ----------------------
Pam J. Finch
/s/Pamela Baca
- -----------------------
Pamela Baca
32A
SECURITY AGREEMENT
[Arizona]
DEBTORS: ASSET INVESTORS OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership ("Operating
Partnership")
3410 South Galena Street, Suite 210
Denver, Colorado 80231
AIOP LOST DUTCHMAN NOTES, L.L.C., a Delaware
limited liability company ("AIOP")
3410 South Galena Street, Suite 210
Denver, Colorado 80231
SECURED PARTY: U. S. BANK NATIONAL ASSOCIATION
918 17th Street, Fifth Floor
Denver, Colorado 80202
EFFECTIVE DATE: April 7, 2000
1. Grant of Security Interest and Collateral Assignment. As collateral
security for the due and punctual payment and performance of the Obligations (as
hereinafter defined), the Debtor hereby grants to the Secured Party, with full
power and authority to exercise all rights and powers granted by the Debtor
hereunder, a lien upon, and a security interest under the Uniform Commercial
Code of Arizona, as in effect in the State of Arizona [Arizona Revised Statutes
("A.R.S.") Sections 47-1101 through 47-11107, as amended from time to time (the
"UCC")] to the extent that the same shall apply, in and to, and hereby
collaterally assigns to the Secured Party, all right, title and interest of the
Debtor in and to the personal property, located in the County of Maricopa, State
of Arizona, to be identified as the "Lost Dutchman Mobile Home Park", "Blue
Valley Mobile Home Park" and "Sun Valley Mobile Home Park" (collectively, the
"Mobile Home Parks") and more particularly described on Exhibit A, attached
hereto (collectively the "Real Property"). Debtor's personal property is more
particularly described on Exhibit B, attached hereto (collectively the
"Collateral"). The Real Property, together with the Collateral are collectively
referred to herein as the "Property".
2. Obligations Secured. "Obligations" shall mean the loan evidenced by
that certain Revolving Promissory Note dated the date hereof in the principal
amount of $15,000,000.00 ("Note"), payable by the Debtor and Community Savanna
Club Joint Venture, a Delaware general partnership ("CSC") to the order of
Secured Party, including without limitation, any future advances, and any and
all interest, commissions, obligations, liabilities, indebtedness, charges, and
expenses now or hereafter chargeable against Operating Partnership by Secured
Party or owing by Operating Partnership to Secured Party in connection with such
loan, whether direct or indirect, joint or several, absolute or contingent, due
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<PAGE>
or to become due, now existing or hereafter arising, and the performance and
fulfillment by Debtor of all of the terms, conditions, promises, covenants, and
provisions contained in this Agreement or in the Note or in any present or
future agreement or instrument between Debtor and Secured Party evidencing or
securing said Note, including the Deed of Trust, Security Agreement, Financing
Statement and Assignment of Rents and Revenues, executed by Debtor
simultaneously herewith (the "Deed of Trust"), the Line of Credit Agreement,
executed by Debtor, CSC, AIOP Florida Partnership I, L.L.C., AIOP Florida
Properties II, L.L.C. and Secured Party (the "Line of Credit Agreement"). Any
capitalized terms used and not otherwise defined herein have the meanings given
them in the Line of Credit Agreement. Any capitalized terms used and not
otherwise defined herein or in the Line of Credit Agreement, shall have the
meanings given to them in the UCC.
3. Warranties and Covenants of the Debtor.
(a) The Debtor has all power, statutory and otherwise, to execute
and deliver this Agreement, to perform its obligations hereunder and to subject
the Collateral to the security interest created hereby, all of which has been
duly authorized by all necessary action. The execution and delivery of this
Agreement, and the performance of this Agreement and the enforcement of the
security interest granted hereby, will not result in any violation of or be in
conflict with or constitute a default under any term of any agreement or
instrument, or, to the best of the knowledge of the Debtor, any judgment,
decree, order, law, statute, rule or governmental regulation applicable to this
Debtor or the Collateral.
(b) AIOP is the sole record and beneficial owner of the Collateral,
and neither the Collateral nor the proceeds thereof are subject to any pledge,
lien, security interest, charge or encumbrance except (i) the lien created
pursuant to this Agreement, and (ii) the lien of the UCC financing statement
delivered by the Debtor to the Secured Party with respect thereto. The Debtor
shall defend the Collateral against all claims and demands of all persons at any
time claiming any interest therein.
(c) The Collateral shall be located at Debtor's places of business
shown above or at the Property. Debtor shall not remove the Collateral from
either of said locations without the prior written consent of the Secured Party
except as contemplated by paragraph 3(g) below. Debtor shall notify Secured
Party of any change in its place of business prior to making the change.
(d) Debtor shall pay all taxes and assessments of every nature
which may be levied or assessed against the Collateral.
(e) The Debtor shall keep the Collateral at all times insured
against risk of loss or damage by fire (including so-called extended coverage),
theft and such other casualties as the Secured Party may reasonably require, all
in such amounts, under such forms of policies, upon such terms, for such periods
and written by such companies or underwriters as the Secured Party may approve
in its reasonable discretion, losses in all cases to be payable to the Secured
Party and the Debtor as their interests may appear. All policies of insurance
2
<PAGE>
shall provide for at least fifteen (15) days' prior written notice of
cancellation to the Secured Party; and the Debtor shall furnish the Secured
Party with an appropriate renewal policy certified by Debtor as complete and
accurate to assure compliance with the provisions of this paragraph.
(f) The Collateral is in good condition. At Debtor's expense,
Debtor shall keep the same in good condition, ordinary wear and tear excepted,
and from time to time shall replace and repair all such parts of the Collateral
as may be broken, worn out, or damaged without allowing any lien to be created
upon the Collateral on account of such replacement or repairs, and shall not
waste or destroy the Collateral. The Secured Party may examine and inspect the
Collateral at any time, wherever located.
(g) Debtor shall not sell, lease, convey, encumber or in any manner
transfer, without the prior written consent of Secured Party, any tangible
personal property now or hereafter owned by Debtor and attached to or contained
in and used in connection with the operation of the Mobile Home Parks, or
otherwise forming a part of the Collateral (except such tangible personal
property as is discarded as obsolete or damaged and is replaced by substitute
items having equivalent or greater book value).
(h) Debtor shall not use the Collateral in violation of any
applicable statutes, regulations or ordinances.
(i) The Debtor's organization and governance documents do not
prohibit any term or condition of this Agreement, and when executed, this
Agreement shall be a binding obligation of the Debtor.
(j) Debtor shall notify Secured Party, in writing, prior to the
time Debtor changes its name, identity or limited liability company structure.
(k) The Collateral is used or bought primarily for use in business.
(l) Debtor shall collect its rents and income in the ordinary
course of business.
(m) After an Event of Default as defined in the Deed of Trust or
the appointment of a receiver as provided therein, Debtor agrees that Secured
Party shall have full power to notify tenants, collect, compromise, endorse,
sell or otherwise deal with proceeds in its own name or that of Debtor at any
time. Secured Party may apply cash proceeds to the payment of any Obligations,
or may release such cash proceeds to Debtor.
4. Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default under this Agreement:
(a) Default in the payment or performance of any monetary
obligation contained or referred to herein or in the Note or in the Deed of
Trust securing the same beyond any applicable grace period specified therein;
3
<PAGE>
(b) Uninsured loss, theft, damage, or destruction of any material
portion of the Collateral; sale or encumbrance of any of the Collateral; or the
making of any levy, seizure or attachment thereof or thereon;
(c) Default in the due performance or observance of any term,
covenant or agreement on Debtor's part to be performed or observed pursuant to
any of the provisions of this Agreement, other than payment and performance of
any monetary obligation, and such non-monetary default shall continue beyond a
period of thirty (30) days after written notice of the Default being sent to
Debtor by Secured Party; or
(d) The occurrence of an Event of Default under the Line of Credit
Agreement.
5. Rights Upon and Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter, and whether or not the Secured Party shall
declare any or all of the Obligations to be immediately due and payable in the
manner and with the effect stated in the Deed of Trust, then and in such event:
(a) The Secured Party may foreclose upon and take possession of the
Collateral and may exclude the Debtor, and all persons claiming by, through or
under the Debtor, from possession thereof, and may assign the Collateral to a
nominee or a third party. In connection herewith the Secured Party or any third
party assignee or nominee of the Secured Party shall have the right to exercise,
in the name of the Debtor, the Debtor's rights and powers with respect to the
Collateral.
(b) The Secured Party shall have all rights and remedies of a
secured party available under the UCC and any other rights and remedies
available under this Agreement and under the Deed of Trust and any other
documents securing the Note or at law or in equity.
(c) The Debtor hereby agrees that if notice of sale or other
disposition of the Collateral is given in the manner and to the address or
addresses then required pursuant to the Deed of Trust at least five (5) business
days before the time of the sale or other disposition, such notice shall be
deemed reasonable and shall fully satisfy any requirement for the giving of said
notice, whether required by the UCC, any other law or otherwise. Any sale or
disposition may occur by private proceedings at Secured Party's election, and
Debtor acknowledges that, due to the nature of the Collateral and its essential
relationship to the operation of the facility, Secured Party may buy at any such
private sale.
(d) Secured Party shall have the right, power and authority to sell
the Collateral or any part thereof at public or private sale for cash, upon
credit, or for future delivery, and at such price or prices as Secured Party may
deem best, and Secured Party may be the purchaser of any and all of the
Collateral so sold, in such manner and order as Secured Party may in its sole
discretion elect. Upon any such sale, Secured Party shall have the right to
4
<PAGE>
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Any such public sale shall be held at such time or times, within ordinary
business hours, and at such place or places, as Secured Party may fix in the
notice of such sale. At any sale the Collateral may be sold in one lot as an
entirety or in separate parcels as Secured Party may determine. Secured Party
shall not be obligated to make any sale pursuant to any such notice. Secured
Party may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at any time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by Secured Party until the selling price is paid by the purchaser
thereof, but Secured Party shall incur no liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold, and in case of any
such failure, such Collateral may again be sold upon like notice. Each and every
method of disposition described in this paragraph shall constitute disposition
in a commercially reasonable manner.
In conjunction therewith, in addition to or in substitution for those rights and
remedies and the rights and remedies provided for herein:
(e) It shall not be necessary that the Collateral or any part
thereof be present at the location of such sale.
(f) The sale by Secured Party of less than the whole of the
Collateral shall not exhaust the rights of Secured Party hereunder or with
respect to the Collateral, and Secured Party is specifically empowered to make
successive sale or sales hereunder until the whole of the Collateral shall be
sold; and, if the proceeds of such sale of less than the whole of the Collateral
shall be less than the aggregate of the indebtedness secured hereby, this
Agreement and the security interest created hereby shall remain in full force
and effect as to the unsold portion of the Collateral just as though no sale had
been made.
(g) In the event any sale hereunder is not completed or is
defective in the opinion of Secured Party, such sale shall not exhaust the
rights of Secured Party hereunder and Secured Party shall have the right to
cause a subsequent sale or sales to be made hereunder.
(h) Any and all statements of fact or other recitals made in any
bill of sale or assignment or other instrument evidencing any sale hereunder as
to nonpayment of the indebtedness or as to the occurrence of an Event of
Default, or as to Secured Party having declared all of such indebtedness to be
due and payable, or as to notice of time, place and terms of sale and the
properties to be sold having been duly given, as to any other act or thing
having been duly done by Secured Party shall be taken as prima facie evidence of
the truth of the facts so stated and recited.
(i) Secured Party may appoint or delegate any one or more persons
as agent to perform any act or acts necessary or incident to any such sale held
by Secured Party, including the sending of notices and the conduct of sale, but
in the name and on behalf of Secured Party.
(j) The proceeds of any sale or other disposition or collection of
or other realization upon all or any part of the Collateral shall be applied in
the following order of priority: first, to pay the costs and expenses of
collection, custody, sale or other disposition or delivery (including, without
5
<PAGE>
limitation, reasonable legal costs and reasonable attorneys' fees) and all other
charges incurred by the Secured Party with respect to the Collateral; second, to
the payment of the Obligations in such order as the Secured Party may, in its
sole discretion, determine; and third, to pay any surplus to the Debtor or to
any person or party lawfully entitled thereto, or as a court of competent
jurisdiction may direct.
(k) Secured Party may use or operate the Collateral for the purpose
of preserving it or its value. Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties. Expenses of
retaking, holding, preparing for sale, selling, or costs and expenses in
enforcing this Agreement, or the like shall include Secured Party's reasonable
attorneys' fees and legal expenses, and the same, together with all advances
made by Secured Party on behalf of the Debtor, shall be part of the Obligations
secured hereby. Debtor shall be liable to Secured Party for any deficiency.
6. Release of Collateral. If the Obligations are fully paid and
discharged, all Collateral held hereunder shall be returned to the Debtor by the
Secured Party promptly upon demand, all requisite termination statements under
the UCC shall be executed and delivered to the Debtor by the Secured Party, and
the Secured Party shall take such other action in connection with such discharge
as the Debtor may reasonably request.
7. Further Agreements. The Debtor has previously executed and delivered
to the Secured Party financing statements pursuant to the UCC covering that
portion of the Collateral for which a security interest may be perfected by
filing. The Debtor shall, upon request of the Secured Party, promptly make,
execute and deliver to the Secured Party, from time to time, a listing of the
specific Collateral, including personal property, goods, equipment, furnishings,
furniture acquired and/or owned in connection with the Mobile Home Parks, and
such other and further financing statements, instruments, documents and
certificates, and perform such other and further acts and assurances, as the
Secured Party may request to perfect, to maintain the priority of, or from time
to time, to renew, such security interests, to confirm or more fully perfect the
rights granted hereby, or in any way to assure the Secured Party all of its
rights hereunder. The Debtor shall pay the costs of all filings and recordings
in public offices of record, and shall, upon request of the Secured Party, make,
execute and deliver such other and further instruments, and take such other and
further actions, as the Secured Party may deem necessary or appropriate to
enable it to realize upon the Collateral, to exercise fully its rights
hereunder, and to ratify and confirm any sale hereunder.
8. Indemnification; Waivers. The Debtor shall indemnify and hold
harmless the Secured Party from any and all liability or damage which the
Secured Party may incur in the exercise and performance, in good faith, of any
of its powers and duties specifically set forth herein, but not for any
liability or damage incurred on account of the gross negligence or willful
misconduct of the Secured Party provided, however, that Debtor shall not
indemnify Secured Party from and against claims asserted by third parties as a
consequence of the Secured Party's negligence or misconduct. No delay or
omission on the part of the Secured Party in exercising any right hereunder
6
<PAGE>
shall operate as a waiver of such right or of any other right hereunder. Any
waiver of any such right on any one occasion shall not be construed as a bar to
or waiver of any such right on any such future occasion. No course of dealing
between the Debtor and the Secured Party nor any failure to exercise, nor any
delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder or under any of the Obligations, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or in the exercise of any other right, power or privilege. The Secured party
shall be under no duty or liability with respect to the Collateral other than to
use reasonable care in the custody of any Collateral while in its possession and
shall not be liable for any failure to take action necessary to preserve rights
against prior or other parties on any instrument constituting the Collateral.
9. Further Transfers Prohibited. The Debtor covenants and agrees that
it will not, at any time during the term of this Agreement, except as
contemplated by paragraph 3(g) hereof, further convey or encumber the Collateral
in any manner whatsoever; and the Debtor agrees that it will do all things
necessary to maintain the enforceability and priority of the Secured Party's
security interest in the Collateral.
10. Notices. Any and all notices, demands, consents, and other
communications required or permitted under this Agreement shall be deemed
adequately given only if given in the manner and to the addresses provided in
the Deed of Trust.
11. General Provisions.
(a) No waiver by Secured Party of any default shall operate as a
waiver of any other default or of the same default on a future occasion. The
taking of this Security Agreement shall not waive or impair any other security
said Secured Party may have or hereafter acquire for the payment of the above
indebtedness, nor shall the taking of any such additional security waive or
impair this Security Agreement; but said Secured Party may resort to any
security it may have in the order it may deem proper, and notwithstanding any
collateral security, Secured Party shall retain its rights of setoff against
Debtor.
(b) At its option, but without obligation to the Debtor, the
Secured Party may discharge taxes, liens, or security interests or other
encumbrances at any time levied or placed on the Collateral, may place and pay
for insurance thereon, may order and pay for the repair, maintenance and
preservation thereof and may pay any necessary filing or recording fees. The
Debtor agrees to reimburse the Secured Party on demand for payment made or any
expense incurred by the Secured Party pursuant to the foregoing authorization.
(c) Until the occurrence of an Event of Default, Debtor may have
possession of the Collateral and use it in any lawful manner not inconsistent
with this Agreement or any policy of insurance thereon, and upon the occurrence
of an Event of Default, Secured Party shall have immediate right to possession
of the Collateral, provided, however, that Secured Party may perfect its
interest in the Collateral by possession.
7
<PAGE>
(d) All rights of the Secured Party hereunder shall inure to the
benefit of its successors and assigns; and all promises and duties of Debtor
shall bind its legal representatives, successors or assigns.
(e) Except as otherwise provided by the UCC, Debtor releases
Secured Party from all claims for loss or damage caused by any act or omission
on the part of Secured Party, its officers, agents and employees, except gross
negligence or willful misconduct.
(f) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado except to the extent that the
laws of the State of Arizona regarding the creation, perfection and realization
upon the security interests and liens hereunder require the application of the
State in which the Property is located. Further, the place where this Agreement
is entered into and the place of performance and transaction of business shall
be deemed to be the State of Colorado.
(g) Unless the context otherwise requires, all terms used herein
which are defined in the UCC, shall have the meaning therein stated.
8
<PAGE>
DATED effective the 7 day of April, 2000.
DEBTORS:
ASSET INVESTORS OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: ASSET INVESTORS CORPORATION, a Delaware
corporation, General Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
AIOP LOST DUTCHMAN NOTES, L.L.C., a Delaware
limited liability company
By: ASSET INVESTORS OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership,
Sole Member and Manager
By: ASSET INVESTORS CORPORATION, a
Delaware corporation, General
Partner
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
9
<PAGE>
SECURED PARTY:
U.S. BANK NATIONAL ASSOCIATION
By: /s/Cyd Petre
--------------------------
Cyd Petre, Vice President
10
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-----------------------
Notary Public
( S E A L )
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Lost Dutchman Notes, L.L.C., a Delaware limited liability
company.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-----------------------
Notary Public
( S E A L )
11
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of April,
2000, by Cyd Petre as Vice President of U. S. BANK NATIONAL ASSOCIATION.
Witness my hand and official seal.
My Commission Expires: 12/7/2000
/s/Pam J. Finch
-----------------------
Notary Public
[ S E A L ]
12
SECURITY AGREEMENT
(Florida Property)
DEBTOR: ASSET INVESTORS OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
3410 South Galena Street, Suite 210
Denver, Colorado 80231
and
COMMUNITY SAVANNA CLUB JOINT VENTURE,
a Delaware general partnership 3410
South Galena Street, Suite 210
Denver, Colorado 80231
SECURED PARTY: U. S. BANK NATIONAL ASSOCIATION
918 17th Street, Fifth Floor
Denver, Colorado 80202
DATE: April 7, 2000
1. Grant of Security Interest and Collateral Assignment. As collateral
security for the due and punctual payment and performance of the Obligations (as
hereinafter defined), the Debtor hereby grants to the Secured Party, with full
power and authority to exercise all rights and powers granted by the Debtor
hereunder, a lien upon, and a security interest under the Uniform Commercial
Code in effect in the State of Florida, as from time to time amended (the "UCC")
to the extent that the same shall apply, in and to, and hereby collaterally
assigns to the Secured Party, all of the Collateral, defined below, located in
Port St. Lucie, St. Lucie County, Florida, to be identified as the "Savanna
Club", and more particularly described on Exhibit A, attached hereto
(collectively the "Real Property"). Debtor's personal property is more
particularly described on Exhibit B, attached hereto (collectively the
"Collateral"). The Real Property, together with the Collateral are collectively
referred to herein as the "Property".
2. Obligations Secured. "Obligations" shall mean the loan evidenced by
the Revolving Promissory Note dated the date hereof in the principal amount of
$15,000,000.00 payable by Debtor, AIOP Lost Dutchman Notes, L.L.C. ("AIOP") to
the order of Secured Party ("Note"), including without limitation, any future
advances, and any and all interest, commissions, obligations, liabilities,
indebtedness, charges, and expenses now or hereafter chargeable against Debtor
by Secured Party or owing by Debtor to Secured Party in connection with such
loan, whether direct or indirect, joint or several, absolute or contingent, due
or to become due, now existing or hereafter arising, and the performance and
fulfillment by Debtor of all of the terms, conditions, promises, covenants, and
1
<PAGE>
provisions contained in this Agreement or in the Note or in any present or
future agreement or instrument between Debtor and Secured Party evidencing or
securing said Note, including the Mortgage, Security Agreement, Financing
Statement and Absolute Assignment of Rents and Revenues, executed by Debtor
simultaneously herewith (the "Mortgage") and the Line of Credit Agreement,
executed by and between Debtor, AIOP, AIOP Florida Properties I, L.L.C., AIOP
Florida Properties II, l.L.C. and Bank (the "Line of Credit Agreement"). Any
capitalized terms used and not otherwise defined herein have the meanings given
them in the Line of Credit Agreement. Any capitalized terms used and not
otherwise defined herein or in the Line of Credit Agreement, shall have the
meanings given to them in the UCC.
3. Warranties and Covenants of the Debtor.
(a) The Debtor has all power, statutory and otherwise, to execute
and deliver this Agreement, to perform its obligations hereunder and to subject
the Collateral to the security interest created hereby, all of which has been
duly authorized by all necessary action. The execution and delivery of this
Agreement, and the performance of this Agreement and the enforcement of the
security interest granted hereby, will not result in any violation of or be in
conflict with or constitute a default under any term of any agreement or
instrument, or, to the best of the knowledge of the Debtor, any judgment,
decree, order, law, statute, rule or governmental regulation applicable to this
Debtor or the Collateral.
(b) The Debtor is the sole record and beneficial owner of the
Collateral, and neither the Collateral nor the proceeds thereof are subject to
any pledge, lien, security interest, charge or encumbrance except (i) the lien
created pursuant to this Agreement, and (ii) the lien of the UCC financing
statement delivered by the Debtor to the Secured Party with respect thereto. The
Debtor shall defend the Collateral against all claims and demands of all persons
at any time claiming any interest therein.
(c) The Collateral shall be located at the Debtor's places of
business shown above or at the Property. Debtor shall not remove the Collateral
from either of said locations without the prior written consent of the Secured
Party except as contemplated by paragraph 3(g) below. Debtor shall notify
Secured Party of any change in its place of business prior to making the change.
(d) Debtor shall pay all taxes and assessments of every nature
which may be levied or assessed against the Collateral.
(e) The Debtor shall keep the Collateral at all times insured
against risk of loss or damage by fire (including so-called extended coverage),
theft and such other casualties as the Secured Party may reasonably require, all
in such amounts, under such forms of policies, upon such terms, for such periods
and written by such companies or underwriters as the Secured Party may approve
in its reasonable discretion, losses in all cases to be payable to the Secured
Party and the Debtor as their interests may appear. All policies of insurance
shall provide for at least fifteen (15) days' prior written notice of
2
<PAGE>
cancellation to the Secured Party; and the Debtor shall furnish the Secured
Party with an appropriate renewal policy certified by Debtor as complete and
accurate to assure compliance with the provisions of this paragraph.
(f) The Collateral is in good condition. At Debtor's expense,
Debtor shall keep the same in good condition, ordinary wear and tear excepted,
and from time to time shall replace and repair all such parts of the Collateral
as may be broken, worn out, or damaged without allowing any lien to be created
upon the Collateral on account of such replacement or repairs, and shall not
waste or destroy the Collateral. The Secured Party may examine and inspect the
Collateral at any time, wherever located.
(g) Debtor shall not sell, lease, convey, encumber or in any
manner transfer, without the prior written consent of Secured Party, any
tangible personal property now or hereafter owned by Debtor and attached to or
contained in and used in connection with the operation of the mobile home park
known as the Savanna Club, or otherwise forming a part of the Collateral (except
such tangible personal property as is discarded as obsolete or damaged and is
replaced by substitute items having equivalent or greater book value).
(h) Debtor shall not use the Collateral in violation of any
applicable statutes, regulations or ordinances.
(i) The Debtor's operating agreement does not prohibit any term or
condition of this Agreement, and when executed, this Agreement shall be a
binding obligation of the Debtor.
(j) Debtor shall notify Secured Party, in writing, prior to the
time Debtor changes its name, identity or limited partnership structure.
(k) The Collateral is used or bought primarily for use in
business.
(l) Debtor shall: (i) collect its rents and income in the ordinary
course of business; and (ii) furnish Secured Party with financial information as
required by Section 5.1 of the Line of Credit Agreement.
(m) After an Event of Default as defined in the Line of Credit
Agreement or the appointment of a receiver as provided therein, Debtor agrees
that Secured Party shall have full power to notify tenants, collect, compromise,
endorse, sell or otherwise deal with proceeds in its own name or that of Debtor
at any time. Secured Party may apply cash proceeds to the payment of any
Obligations, or may release such cash proceeds to Debtor.
4. Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default under this Agreement:
(a) Default in the payment or performance of any monetary
obligation contained or referred to herein or in the Note or in the Mortgage
securing the same beyond any applicable grace period specified therein;
3
<PAGE>
(b) Uninsured loss, theft, damage, or destruction of any material
portion of the Collateral; sale or encumbrance of any of the Collateral; or the
making of any levy, seizure or attachment thereof or thereon;
(c) Default in the due performance or observance of any term,
covenant or agreement on Debtor's part to be performed or observed pursuant to
any of the provisions of this Agreement, other than payment and performance of
any monetary obligation, and such non-monetary default shall continue beyond a
period of thirty (30) days after written notice of the Default being sent to
Debtor by Secured Party; or
(d) The occurrence of an Event of Default under the Line of Credit
Agreement or the Mortgage, or under any other document securing the Note.
5. Rights Upon an Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter, and whether or not the Secured Party shall
declare any or all of the Obligations to be immediately due and payable in the
manner and with the effect stated in the Mortgage, then and in such event:
(a) The Secured Party may foreclose upon and take possession of
the Collateral and may exclude the Debtor, and all persons claiming by, through
or under the Debtor, from possession thereof, and may assign the Collateral to a
nominee or a third party. In connection herewith the Secured Party or any third
party assignee or nominee of the Secured Party shall have the right to exercise,
in the name of the Debtor, the Debtor's rights and powers with respect to the
Collateral.
(b) The Secured Party shall have all rights and remedies of a
secured party available under the UCC and any other rights and remedies
available under this Agreement and under the Mortgage and any other documents
securing the Note or at law or in equity.
(c) The Debtor hereby agrees that if notice of sale or other
disposition of the Collateral is given in the manner and to the address or
addresses then required pursuant to the Mortgage at least five (5) business days
before the time of the sale or other disposition, such notice shall be deemed
reasonable and shall fully satisfy any requirement for the giving of said
notice, whether required by the UCC, any other law or otherwise. Any sale or
disposition may occur by private proceedings at Secured Party's election, and
Debtor acknowledges that, due to the nature of the Collateral and its essential
relationship to the operation of the facility, Secured Party may buy at any such
private sale.
(d) Secured Party shall have the right, power and authority to
sell the Collateral or any part thereof at public or private sale for cash, upon
credit, or for future delivery, and at such price or prices as Secured Party may
deem best, and Secured Party may be the purchaser of any and all of the
Collateral so sold, in such manner and order as Secured Party may in its sole
discretion elect. Upon any such sale, Secured Party shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Any such public sale shall be held at such time or times, within ordinary
4
<PAGE>
business hours, and at such place or places, as Secured Party may fix in the
notice of such sale. At any sale the Collateral may be sold in one lot as an
entirety or in separate parcels as Secured Party may determine. Secured Party
shall not be obligated to make any sale pursuant to any such notice. Secured
Party may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at any time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by Secured Party until the selling price is paid by the purchaser
thereof, but Secured Party shall incur no liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold, and in case of any
such failure, such Collateral may again be sold upon like notice. Each and every
method of disposition described in this paragraph shall constitute disposition
in a commercially reasonable manner.
(e) In conjunction therewith, in addition to or in substitution
for those rights and remedies and the rights and remedies provided for herein:
(i) It shall not be necessary that the Collateral or any part
thereof be present at the location of such sale.
(ii) The sale by Secured Party of less than the whole of the
Collateral shall not exhaust the rights of Secured Party hereunder or with
respect to the Collateral, and Secured Party is specifically empowered to make
successive sale or sales hereunder until the whole of the Collateral shall be
sold; and, if the proceeds of such sale of less than the whole of the Collateral
shall be less than the aggregate of the indebtedness secured hereby, this
Agreement and the security interest created hereby shall remain in full force
and effect as to the unsold portion of the Collateral just as though no sale had
been made.
(iii) In the event any sale hereunder is not completed or is
defective in the opinion of Secured Party, such sale shall not exhaust the
rights of Secured Party hereunder and Secured Party shall have the right to
cause a subsequent sale or sales to be made hereunder.
(iv) Any and all statements of fact or other recitals made in
any bill of sale or assignment or other instrument evidencing any sale hereunder
as to nonpayment of the indebtedness or as to the occurrence of a Default, or as
to Secured Party having declared all of such indebtedness to be due and payable,
or as to notice of time, place and terms of sale and the properties to be sold
having been duly given, as to any other act or thing having been duly done by
Secured Party shall be taken as prima facie evidence of the truth of the facts
so stated and recited.
(v) Secured Party may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any such
sale held by Secured Party, including the sending of notices and the conduct of
sale, but in the name and on behalf of Secured Party.
5
<PAGE>
(f) The proceeds of any sale or other disposition or collection of
or other realization upon all or any part of the Collateral shall be applied in
the following order of priority: first, to pay the costs and expenses of
collection, custody, sale or other disposition or delivery (including, without
limitation, reasonable legal costs and reasonable attorneys' fees) and all other
charges incurred by the Secured Party with respect to the Collateral; second, to
the payment of the Obligations in such order as the Secured Party may, in its
sole discretion, determine; and third, to pay any surplus to the Debtor or to
any person or party lawfully entitled thereto, or as a court of competent
jurisdiction may direct.
(g) Secured Party may use or operate the Collateral for the
purpose of preserving it or its value. Secured Party may require Debtor to
assemble the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties.
Expenses of retaking, holding, preparing for sale, selling, or costs and
expenses in enforcing this Agreement, or the like shall include Secured Party's
reasonable attorneys' fees and legal expenses, and the same, together with all
advances made by Secured Party on behalf of the Debtor, shall be part of the
Obligations secured hereby. Debtor shall be liable to Secured Party for any
deficiency.
6. Release of Collateral. If the Obligations are fully paid and
discharged, all Collateral held hereunder shall be returned to the Debtor by the
Secured Party promptly upon demand, all requisite termination statements under
the UCC shall be executed and delivered to the Debtor by the Secured Party, and
the Secured Party shall take such other action in connection with such discharge
as the Debtor may reasonably request.
7. Further Agreements. The Debtor has previously executed and delivered
to the Secured Party financing statements pursuant to the UCC covering that
portion of the Collateral for which a security interest may be perfected by
filing. The Debtor shall, upon request of the Secured Party, promptly make,
execute and deliver to the Secured Party, from time to time, a listing of the
specific Collateral, including personal property, goods, equipment, furnishings,
furniture acquired and/or owned in connection with the hotel, and such other and
further financing statements, instruments, documents and certificates, and
perform such other and further acts and assurances, as the Secured Party may
request to perfect, to maintain the priority of, or from time to time, to renew,
such security interests, to confirm or more fully perfect the rights granted
hereby, or in any way to assure the Secured Party all of its rights hereunder.
The Debtor shall pay the costs of all filings and recordings in public offices
of record, and shall, upon request of the Secured Party, make, execute and
deliver such other and further instruments, and take such other and further
actions, as the Secured Party may deem necessary or appropriate to enable it to
realize upon the Collateral, to exercise fully its rights hereunder, and to
ratify and confirm any sale hereunder.
8. Indemnification; Waivers. The Debtor shall indemnify and hold
harmless the Secured Party from any and all liability or damage which the
Secured Party may incur in the exercise and performance, in good faith, of any
of its powers and duties specifically set forth herein, but not for any
liability or damage incurred on account of the gross negligence or willful
6
<PAGE>
misconduct of the Secured Party; provided, however, that Debtor shall not
indemnify Secured Party from and against claims asserted by third parties as a
consequence of the Secured Party's negligence or misconduct. No delay or
omission on the part of the Secured Party in exercising any right hereunder
shall operate as a waiver of such right or of any other right hereunder. Any
waiver of any such right on any one occasion shall not be construed as a bar to
or waiver of any such right on any such future occasion. No course of dealing
between the Debtor and the Secured Party nor any failure to exercise, nor any
delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder or under any of the Obligations, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or in the exercise of any other right, power or privilege. The Secured party
shall be under no duty or liability with respect to the Collateral other than to
use reasonable care in the custody of any Collateral while in its possession and
shall not be liable for any failure to take action necessary to preserve rights
against prior or other parties on any instrument constituting the Collateral.
9. Further Transfers Prohibited. The Debtor covenants and agrees that
it will not, at any time during the term of this Agreement, except as
contemplated by paragraph 3(g) hereof, further convey or encumber the Collateral
in any manner whatsoever; and the Debtor agrees that it will do all things
necessary to maintain the enforceability and priority of the Secured Party's
security interest in the Collateral.
10. Notices. Any and all notices, demands, consents, and other
communications required or permitted under this Agreement shall be deemed
adequately given only if given in the manner and to the addresses provided in
the Mortgage.
11. General Provisions.
(a) No waiver by Secured Party of any default shall operate as a
waiver of any other default or of the same default on a future occasion. The
taking of this Security Agreement shall not waive or impair any other security
said Secured Party may have or hereafter acquire for the payment of the above
indebtedness, nor shall the taking of any such additional security waive or
impair this Security Agreement; but said Secured Party may resort to any
security it may have in the order it may deem proper, and notwithstanding any
collateral security, Secured Party shall retain its rights of setoff against
Debtor.
(b) At its option, but without obligation to the Debtor, the
Secured Party may discharge taxes, liens, or security interests or other
encumbrances at any time levied or placed on the Collateral, may place and pay
for insurance thereon, may order and pay for the repair, maintenance and
preservation thereof and may pay any necessary filing or recording fees. The
Debtor agrees to reimburse the Secured Party on demand for payment made or any
expense incurred by the Secured Party pursuant to the foregoing authorization.
7
<PAGE>
(c) Until the occurrence of a Default, Debtor may have possession
of the Collateral and use it in any lawful manner not inconsistent with this
Agreement or any policy of insurance thereon, and upon the occurrence of a
Default, Secured Party shall have immediate right to possession of the
Collateral, provided, however, that Secured Party may perfect its interest in
the Collateral by possession.
(d) All rights of the Secured Party hereunder shall inure to the
benefit of its successors and assigns; and all promises and duties of Debtor
shall bind its legal representatives, successors or assigns.
(e) Except as may be otherwise provided by the UCC, Debtor
releases Secured Party from all claims for loss or damage caused by any act or
omission on the part of Secured Party, its officers, agents and employees,
except gross negligence or willful misconduct.
(f) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado except to the extent that the
laws of the State of Florida regarding the creation, perfection and realization
upon the security interests and liens hereunder require the application of the
State in which the Property is located. Further, the place where this Agreement
is entered into and the place of performance and transaction of business shall
be deemed to be the State of Colorado.
(g) Unless the context otherwise requires, all terms used herein
which are defined in the Florida Uniform Commercial Code, shall have the meaning
therein stated.
DATED effective the 7 day of April, 2000.
DEBTOR:
ASSET INVESTORS OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: ASSET INVESTORS CORPORATION, a Delaware
corporation, General Partner
By: /s/David M. Becker
----------------------------
David M. Becker
Chief Financial Officer
8
<PAGE>
COMMUNITY SAVANNA CLUB JOINT VENTURE, a
Delaware general partnership
By: AIOP FLORIDA PROPERTIES I, L.L.C.,
a Delaware limited liability
company, Managing General Partner
By: ASSET INVESTORS OPERATING
PARTNERSHIP, L.P., a Delaware
limited partnership, Sole
Member and Manager
By: ASSET INVESTORS
CORPORATION, a Delaware
corporation, General
Partner
By: /s/David M. Becker
--------------------
David M. Becker
Chief Financial
Officer
SECURED PARTY:
U. S. BANK NATIONAL ASSOCIATION
By: /s/Cyd Petre
---------------------
Cyd Petre, Vice President
9
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-----------------------
Notary Public
( S E A L )
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of
April, 2000, by David M. Becker as Chief Financial Officer of Asset Investors
Corporation, a Delaware corporation, as general partner of Asset Investors
Operating Partnership, L.P., a Delaware limited partnership, as Sole Member and
Manager of AIOP Florida Properties I, L.L.C., as Managing General Partner of
Community Savanna Club Joint Venture, a Delaware general partnership.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-----------------------
Notary Public
( S E A L )
10
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 7 day of April,
2000, by Cyd Petre as Vice President of U. S. Bank National Association.
Witness my hand and official seal.
My commission expires: 12/7/2000
/s/Pam J. Finch
-----------------------
Notary Public
( S E A L )
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 888
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4350
<PP&E> 146394
<DEPRECIATION> (8123)
<TOTAL-ASSETS> 175033
<CURRENT-LIABILITIES> 6565
<BONDS> 68711
0
0
<COMMON> 56
<OTHER-SE> 83118
<TOTAL-LIABILITY-AND-EQUITY> 175033
<SALES> 0
<TOTAL-REVENUES> 7656
<CGS> 0
<TOTAL-COSTS> 6007
<OTHER-EXPENSES> 35
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 894
<INCOME-PRETAX> 720
<INCOME-TAX> 0
<INCOME-CONTINUING> 720
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 720
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
