AIP Industrial Portfolio
Gateway 5 & 6
Dallas County, Texas
AEGON Loan No. 87481
$2,850,000 November __, 1996
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, AIP Properties #3, L.P., a
limited partnership organized under Delaware law, and having an
office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-
▇▇▇▇ ("Borrower"), promises to pay $2,850,000, together with
interest according to the terms of this secured promissory note
(the "Note"), to the order of Life Investors Insurance Company of
America, a corporation organized under the laws of the State of
Iowa (together with any future holder, "Lender"), whose address
is c/o AEGON USA Realty Advisors, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at
the rate of eight and sixty-one one hundredths percent
(8.61%) per annum (the "Note Rate"). Interest shall be
calculated on the basis of a 360-day year and computed each
month in arrears on the basis of a 30-day month.
2. SCHEDULED PAYMENTS
2.1 Prepayment of Interest for the Month of Funding
On the date of this Note, Borrower shall prepay
interest due from and including the date of this Note
through and including the last day of November, 1996.
2.2 Monthly Principal and Interest Payments
On the first day of January, 1997 and of each
subsequent calendar month through November, 2003,
Borrower shall pay an installment in the amount of
$24,098.73. Monthly installments of principal and
interest shall be made when due, regardless of the
prior acceptance by Lender of unscheduled payments.
2.3 Final Payment
This Note shall mature on the first day of December,
2003 (the "Maturity Date"), when the Borrower shall pay
its entire principal balance, together with all accrued
interest and any other amounts owed by the Borrower
under the Loan Documents. The term "Loan Documents"
means all documents entered into now or in the future
in connection with the $27,990,000 loan (the "Loan")
made by Lender to Borrower pursuant to that certain
Loan Agreement of even date herewith, by and among
Borrower, Lender, and American Industrial Properties
REIT (the "Loan Agreement"), including the Loan
Agreement, this Note, the other notes evidencing
Borrower's obligation to repay the Loan as provided in
the Loan Agreement (this Note and such other Notes
sometimes collectively referred to herein as the
"Notes"), and the Deeds of Trust, as hereinafter
defined in Section 11, exclusive, however, of the
Environmental Indemnity Agreements of even date
herewith executed by Borrower and the Indemnity
Agreements of even date herewith executed by American
Industrial Properties REIT, which are not Loan
Documents and are not secured by the Deeds of Trust or
any other security.
3. BALLOON PAYMENT ACKNOWLEDGEMENT
The Borrower acknowledges that the scheduled monthly
installments referred to in Subsection 2.2 will not amortize
fully the principal sum of this Note over its term,
resulting in a "balloon" payment at maturity. Any future
agreement to extend the Note or refinance the indebtedness
it evidences may be made only by means of a writing executed
by a duly authorized officer of ▇▇▇▇▇▇.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When Lender receives a monthly principal and interest
payment, Lender shall apply it first to interest in arrears
for the previous month and then to the amortization of the
principal amount of the Note, unless other amounts are then
due under the Note or the other Loan Documents. If other
amounts are due when a payment is received, Lender shall
apply the payment first to accrued interest and then, at its
discretion, to either those other amounts or to principal.
5. DEFAULT INTEREST
If a Default (as defined in Section 8 below) exists, the
outstanding principal balance of this Note shall, at the
option of Lender, bear interest at a rate (the "Default
Rate") equal to the lesser of (i) eighteen percent (18%) per
annum and (ii) the maximum rate allowed by law. If a court
of competent jurisdiction determines that any interest
charged has exceeded the maximum rate allowed by law, the
excess of the amount collected over the legal rate of
interest will be applied to the indebtedness as a principal
prepayment without premium, retroactively, as of the date of
receipt.
6. LATE CHARGE
▇▇▇▇▇▇▇▇ shall pay a late charge equal to five percent (5%)
of the amount of each scheduled monthly principal and
interest payment that is not received by Lender on or before
the tenth day of the calendar month in which it is due.
Late charges shall be paid on or before the tenth day of the
calendar month following the month during which they accrue.
Interest on unpaid late charges shall, at ▇▇▇▇▇▇'s
discretion, accrue at the Note Rate beginning on the first
day of the calendar month following their accrual.
7. PREPAYMENT
This Note is closed to prepayment during the first thirty
six (36) full calendar months of its term. Thereafter, the
principal balance of this Note may be prepaid, in whole or
in part, upon not less than thirty (30) days' prior written
notice to Lender. At the time of any prepayment, the
Borrower shall pay all accrued interest on the principal
balance of the Note and all other sums due to Lender under
the Loan Documents. In addition, unless the prepayment
occurs during the 90-day period preceding the Maturity Date,
the Borrower shall pay a prepayment premium equal to the
greater of (a) one percent of the prepayment amount and (b)
an amount that the parties agree will compensate Lender for
the loss of its bargained-for investment (the "Yield
Protection Amount").
Lender shall calculate the Yield Protection Amount as
follows:
First, Lender shall determine the annual percentage yield on
U.S. Treasury securities maturing at the end of the term of
the Loan (the "Annual Treasury Instrument Yield"). The
Annual Treasury Instrument Yield shall be determined as of
ten (10) business days before the effective date of the
prepayment. Lender shall base its determination of the
Annual Treasury Instrument Yield on the yield on U.S.
Treasury instruments, as published in The Wall Street
Journal (or, if The Wall Street Journal is not then being
published or if no such reports are then being published in
The Wall Street Journal, as reported in another public
source of information nationally recognized for accuracy in
the reporting of the trading of governmental securities).
If no such instruments mature on the exact maturity date of
the Note, Lender shall interpolate the Annual Treasury
Instrument Yield on a straight-line basis using the yield on
the instrument whose maturity date most closely precedes
that of the Note, and the yield on the instrument whose
maturity date most closely succeeds that of the Note.
Second, ▇▇▇▇▇▇ shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the "bond-equivalent" rate which would produce a
yield equal to the Annual Treasury Instrument Yield (the
"Monthly Reinvestment Payment").
Third, ▇▇▇▇▇▇ shall determine the hypothetical monthly
interest-only payment (based on a 360-day year and 30-day
months) which would be payable on a promissory note having a
principal balance equal to the prepaid amount and bearing
interest at the Note Rate (the "Monthly Coupon Rate
Payment").
Fourth, Lender shall determine the present value of a series
of monthly payments, each equal in amount to the amount by
which the Monthly Coupon Rate Payment exceeds the Monthly
Reinvestment Payment, received on the first day of each
calendar month from and including the first day of the first
full calendar month immediately following the effective date
of prepayment to and including the Maturity Date, using the
Annual Treasury Instrument Yield as the discount rate.
The present value of that series of payments is the "Yield
Protection Amount."
Notwithstanding the foregoing, prepayments of principal made
at any time by reason of Lender electing to apply insurance
proceeds or condemnation proceeds in reduction of the
principal balance hereof shall be without prepayment
premium.
8. DEFAULT
A default on this Note ("Default") shall exist if (a) Lender
fails to receive any required installment of principal and
interest on or before the tenth day of the calendar month in
which it is due, (b) the Borrower fails to pay the matured
balance of the Note on the Maturity Date or (c) a "Default"
exists as defined in any of the Deeds of Trust, as
hereinafter defined.
9. ACCELERATION
If a Default exists, Lender may, at its option, without
notice to Borrower, declare the unpaid principal balance of
this Note to be immediately due and payable, together with
all accrued interest on the indebtedness and all other
charges due and payable by Borrower under any other Loan
Document.
10. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the
indebtedness shall be presumed to be an attempt to avoid the
provisions of Section 7 of this Note, which prohibit
prepayment or condition ▇▇▇▇▇▇'s obligation to accept
prepayment on the payment of a prepayment premium.
Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized
by Lender through its remedies following acceleration, shall
be subject to either (a) the prepayment premium required
under Section 7, or, if it is tendered or realized during
the first 36 full calendar months of the term of the Loan,
the greater of (i) such prepayment premium and (ii) a
premium equal to 10% of the amount so tendered or realized.
11. SECURITY
This Note is secured, among other things, by (a) a Deed of
Trust and Security Agreement granted by Borrower for the
benefit of Lender, conveying certain real property located
at ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇, as more particularly described therein, conveying
certain real property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, as more particularly
described therein, conveying certain real property located
at 2019-▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇, as more particularly described therein, conveying
certain real property located at ▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
as more particularly described therein, conveying certain
real property located at 15621 and ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, as more particularly
described therein, conveying certain real property located
at ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇, as more particularly described therein, and conveying
certain real property located at ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, as more particularly
described therein, (b) a Deed of Trust and Security
Agreement granted by Borrower for the benefit of Lender,
conveying certain real property located at ▇▇▇, ▇▇▇-▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
as more particularly described therein, (c) a Deed of Trust
and Security Agreement granted by Borrower for the benefit
of Lender, conveying certain real property located at ▇▇▇-
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, as more particularly described therein, and (d)
upon Borrower's acquisition of title to that certain real
property located at ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, Texas, by a Deed of Trust and Security
Agreement granted by ▇▇▇▇▇▇▇▇ for the benefit of ▇▇▇▇▇▇,
conveying such property as more particularly described
therein (individually, a "Deed of Trust" and, collectively,
the "Deeds of Trust"), and by Assignments of Leases and
Rents granted by Borrower to Lender assigning the landlord's
interest in all present and future leases of all or any
portion of the real properties encumbered by the Deeds of
Trust. Reference is made to the Loan Documents for a
description of the security and rights of ▇▇▇▇▇▇. This
reference shall not affect the absolute and unconditional
obligation of the Borrower to pay the indebtedness evidenced
by this Note in accordance with its terms.
12. RECOURSE TO BORROWER
Borrower shall have no personal liability for, and ▇▇▇▇▇▇
shall have no recourse to any property of Borrower other
than the property subjected to the liens or security
interests of any of the Loan Documents (the "Property"), in
the event of Default by Borrower in performing its
obligations under this Note or any other Loan Document;
provided, however, that Borrower shall be personally liable
for, and shall hold Lender harmless from and against
▇▇▇▇▇▇'s costs, expenses (including reasonable attorneys'
fees), losses and actual damages caused by (i) waste, not
including ordinary wear and tear, unless Borrower fails to
maintain the real property securing the Notes (the "Real
Property") with ordinary care; (ii) fraud or written
material misrepresentation by Borrower; (iii) failure to pay
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv)
misapplication of tenant security deposits, insurance
proceeds or condemnation proceeds, or the unavailability to
Lender of condemnation proceeds because a lease of the Real
Property grants a tenant the right to a portion of the
owner's award (unless that portion is specifically allocated
to the tenant's interest by the condemning authority); (v)
failure while in monetary default to pay to Lender all
rents, income and profits, net of reasonable and customary
operating expenses; (vi) failure to perform under the
environmental covenants or indemnifications set forth in the
Loan Documents; (vii) destruction or removal from the Real
Property of fixtures or personal property securing the Loan,
unless replaced by items of equal value; (viii) terminating,
amending or entering into a lease of the Real Property in
violation of the Loan Documents; (ix) willful or grossly
negligent violation of applicable law; or (x) collection of
the Loan, including the costs of enforcement of the Loan
Documents after the Note matures by acceleration or lapse of
time. Borrower may also assume recourse liability under
Loan Documents or other agreements that expressly provide
for such personal liability, and such Loan Documents or
agreements, if any, shall not be subject to the exculpation
from personal liability set forth in this Paragraph.
In addition, the Borrower shall have personal liability for
the entire indebtedness if the Borrower (a) voluntarily
transfers or encumbers the Property in violation of the Loan
Documents, or (b) files a voluntary petition for
reorganization under the Bankruptcy Code and has not
offered, prior to the filing, to enter into ▇▇▇▇▇▇'s choice
of either an agreement to permit an uncontested foreclosure
or an agreement to deliver a deed in lieu of foreclosure,
within sixty (60) days of Lender's acceptance of the offer.
Following ▇▇▇▇▇▇'s acceptance of such an offer, default by
the Borrower shall trigger personal liability for the entire
indebtedness. No such offer shall be conditioned on any
payment by ▇▇▇▇▇▇, on the release of any obligor from any
recourse obligation, or on any other concession.
13. SEVERABILITY
If any provision of this Note is held to be invalid, illegal
or unenforceable in any respect, or operates, or would if
enforced operate to invalidate this Note, then that
provision shall be deemed null and void. Nevertheless, its
nullity shall not affect the remaining provisions of this
Note, which shall in no way be affected, prejudiced or
disturbed.
14. WAIVER
The Borrower waives demand, presentment for payment,
protest, notice of protest, dishonor and of nonpayment and
any and all lack of diligence or delays in collection or
enforcement of this Note. Without affecting the liability
of Borrower under this Note, Lender may release any of the
Property, grant any indulgence, forbearance or extension of
time for payment, or release any other person now or in the
future liable for the payment or performance of any
obligation under this Note or any of the Loan Documents.
Borrower (i) waives any homestead or similar exemption; (ii)
waives any statute of limitation; (iii) agrees that Lender
may, without impairing any future right to insist on strict
and timely compliance with the terms of this Note, grant any
number of extensions of time for the scheduled payments of
any amounts due, and may make any other accommodation with
respect to the indebtedness; (iv) waives any right to
require a marshaling of assets; and (v) to the extent not
prohibited by applicable law, waives the benefit of any law
or rule of law intended for its advantage or protection as a
debtor or providing for its release or discharge from
liability under this Note, excepting only the defense of
full and complete payment of all amounts due under this Note
and the Loan Documents.
15. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the
number and gender in which they are used, shall be deemed
and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any
paragraph or clause herein may require, the same as if such
word had been fully and properly written in the correct
number and gender.
16. WAIVER OF JURY TRIAL
THE BORROWER AND ▇▇▇▇▇▇ ▇▇▇▇▇ ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(A) UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AND ▇▇▇▇▇▇ AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
17. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against
the money, securities, or other property of the Borrower
given to Lender by law, ▇▇▇▇▇▇ shall have a lien upon and a
right of setoff against all money, securities, and other
property of the Borrower, now or hereafter in possession of
or on deposit with ▇▇▇▇▇▇, whether held in a general or
special account or deposit, or safe-keeping or otherwise,
and every such lien and right of setoff may be exercised
without demand upon, or notice to the Borrower. No lien or
right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to
exercise such right of setoff or to enforce such lien, or by
any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of
setoff or lien is specifically waived or released by an
instrument in writing executed by ▇▇▇▇▇▇.
18. COMMERCIAL LOAN
The Borrower hereby represents and warrants to Lender that
the Loan was made for commercial or business purposes, and
that the funds evidenced by this Note will be used solely in
connection with such purposes.
19. GOVERNING LAW
This Note shall be construed and enforced according to, and
governed by, the laws of Texas without reference to
conflicts of laws provisions which, but for this provision,
would require the application of the law of any other
jurisdiction.
20. TIME OF ESSENCE
In the performance of the Borrower's obligations under this
Note, time is of the essence.
AIP PROPERTIES #3, L.P.,
a Delaware limited partnership
By AIP Properties #3, Inc.,
a Texas corporation,
its General Partner
By _____________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Identification: This is to certify that this is one of
the Secured Promissory Notes described (in addition to certain
deeds of trust encumbering non-Maryland real property) in a
certain Deed of Trust and Security Agreement of even date granted
by AIP Properties #3, L.P., Delaware limited partnership, to the
trustee named therein for the benefit of Lender, and conveying
the property located in Baltimore, ▇▇▇▇ Arundel County, Maryland,
described therein pertaining to an aggregate $27,990,000 loan
made by Life Investors Insurance Company of America. This Note
and the Deed of Trust and Security Agreement securing the same
were executed in my presence.
____________________________
Notary Public
[SEAL]
