Exhibit 10.167
SECURED PROMISSORY NOTE
LOAN NO. 753943
$19,617,000.00 June 7, 2004
1. FOR VALUE RECEIVED, INLAND WESTERN WATAUGA LIMITED PARTNERSHIP, an
Illinois limited partnership, as "BORROWER" ("Borrower" to be construed as
"Borrowers" if the context so requires), hereby promises to pay to the order of
PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (as "LENDER"), having a
principal place of business and post office address at c/o Principal Real Estate
Investors, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other
place as Lender may designate, the principal sum of Nineteen Million Six Hundred
Seventeen Thousand and 00/100 Dollars ($19,617,000.00) (the "LOAN AMOUNT") or so
much thereof as shall from time to time have been advanced, together with
interest on the unpaid balance of said sum from June 7, 2004 (the "CLOSING
DATE"), at the lesser of (a) the maximum rate permitted by applicable law and
(b) prior to default or maturity, the rate of four and 14/100 percent (4.14%)
per annum, subject to increase as set forth in the immediately following
paragraph.
With respect to the Initial Funding (as defined in Paragraph 14 below), a
payment of interest from the Closing Date to and including June 30, 2004, shall
be paid on the Closing Date calculated by multiplying the actual number of days
elapsed in the period for which interest is being calculated by a daily rate
based on the foregoing annual interest rate and a 360-day year. Thereafter,
interest shall be computed on the unpaid balance on the basis of a 360-day year
composed of twelve 30-day months. With respect to the Initial Funding, beginning
on August 1, 2004, interest shall be due and payable in arrears in monthly
installments of Fifty Eight Thousand Nine Hundred Ninety Five and 00/100 Dollars
($58,995.00), with an installment in a like amount due and payable on the same
day of each month thereafter, except that all remaining principal and interest
to and including the date of payment and other Indebtedness shall be due and
payable on July 1,2010 or such earlier date resulting from the acceleration of
the Indebtedness by ▇▇▇▇▇▇ ("MATURITY DATE"). Upon the occurrence of the Second
Funding (as defined in Paragraph 14 below), the monthly installments of interest
due from and after such date shall be recalculated based upon a blended rate of
four and 14/100 percent (4.14%) per annum with respect to the funds disbursed as
of the Initial Funding and four and 34/100 percent (4.34%) per annum with
respect to the funds disbursed in connection with the Second Funding. All
principal and interest shall be paid in lawful money of the United States of
America by wire transfer of immediately available funds to Lender at ▇▇▇▇▇ Fargo
Bank, Iowa, N.A., 7th and Walnut Streets, Des Moines, Iowa 50304, for credit to
Principal Life Insurance Company, Account No. 0000014752, RE: Loan No. 753943
with reference to Borrower. In the event Borrower fails to make any monthly
payment under this Note on or before the due date thereof, ▇▇▇▇▇▇▇▇ agrees to
make all subsequent payments by automated clearing house transfer through such
bank or financial institution as shall be approved in writing by ▇▇▇▇▇▇, shall
be made to an account designated by ▇▇▇▇▇▇, and shall be initiated by Lender or
shall be made in such other manner as Lender may direct from time to time. Any
other monthly deposits or payments Borrower is required to make to Lender under
the terms of the Loan Documents shall be made by the same payment method and on
the same date as the installments of interest due under this Note.
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2. No privilege is reserved by Borrower to prepay any principal of this
Note prior to the Maturity Date, except on or after the date hereof, privilege
is reserved, after giving thirty (30) days' prior written notice to ▇▇▇▇▇▇, to
prepay in full, but not in part, all principal and interest to and including the
date on which payment is made, along with all sums, amounts, advances, or
charges due under any instrument or agreement by which this Note is secured,
upon the payment of a "MAKE WHOLE PREMIUM." The Make Whole Premium shall be the
lesser of: (a) the maximum amount which is allowable under Texas law limiting
the amount of interest which may be contracted for, charged or received after
considering all other amounts constituting or deemed to constitute interest, and
(b) the greater of one percent (1%) of the principal amount to be prepaid or a
premium calculated as provided in subparagraphs (a) through (c) below:
(a) Determine the "REINVESTMENT YIELD." The Reinvestment Yield will be
equal to the yield on the U.S. Treasury Issue ("PRIMARY ISSUE")*
published one week prior to the date of prepayment and converted to an
equivalent monthly compounded nominal yield.
*At this time there is not a U.S. Treasury Issue for this prepayment
period. At the time of prepayment, Lender shall select in its sole and
absolute discretion a U.S. Treasury Issue with similar remaining time
to maturity as this Note.
(b) Calculate the "PRESENT VALUE OF THE LOAN." The Present Value of the
Loan is the present value of the payments to be made in accordance
with this Note (all installment payments and any remaining payment due
on the Maturity Date) discounted at the Reinvestment Yield for the
number of months remaining from the date of prepayment to the Maturity
Date.
(c) Subtract the amount of the prepaid proceeds from the Present Value of
the Loan as of the date of prepayment. Any resulting positive
differential shall be the premium.
If Borrower has otherwise fully complied with the preceding paragraphs, then,
during the last 90 days prior to the Maturity Date, provided no Event of Default
exists, no Make Whole Premium shall be payable.
3. ▇▇▇▇▇▇▇▇ agrees that if ▇▇▇▇▇▇ accelerates the whole or any part of
the principal sum evidenced hereby, after the occurrence of an Event of Default,
or applies any proceeds pursuant to the provisions of the Loan Documents,
Borrower waives any right to prepay said principal sum in whole or in part
without premium and agrees to pay, as yield maintenance protection and not as a
penalty, the Make Whole Premium.
Notwithstanding the above, in the event any proceeds from a casualty or Taking
of the Premises are applied to reduce the principal balance hereof, such
reduction shall be made without a Make Whole Premium, provided no Event of
Default then exists under the Loan Documents.
4. If any payment of principal, interest, Make Whole Premium, or other
Indebtedness is not made when due, damages will be incurred by ▇▇▇▇▇▇, including
additional expense in handling overdue payments, the amount of which is
difficult and impractical to ascertain. ▇▇▇▇▇▇▇▇ therefore agrees to pay, upon
demand, the sum of four cents ($.04) for each
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one dollar ($1.00) of each said payment which becomes overdue ("LATE CHARGE") as
a reasonable estimate of the amount of said damages, subject, however, to the
limitations contained in paragraph 6 hereof.
Notwithstanding anything hereinabove to the contrary, the Late Charge assessed
on any amount due on the Maturity Date but not then paid, whether or not by
acceleration, shall not be four cents for each one dollar as described above,
but shall instead be a sum equal to the interest which would have accrued on the
principal balance then outstanding from the date the payment is made to the end
of the month in which the Maturity Date occurs. Such Late Charge shall be in
addition to interest otherwise accruing under this Note.
5. If any Event of Default has occurred and is continuing under the Loan
Documents, the entire principal balance of the Loan, interest then accrued, and
Make Whole Premium, and all other Indebtedness whether or not otherwise then
due, shall at the option of Lender, become immediately due and payable without
demand or notice, and whether or not Lender has exercised said option, interest
shall accrue on the entire principal balance, interest then accrued, Make Whole
Premium and any other Indebtedness then due, at a rate equal to the Default Rate
until fully paid.
6. Notwithstanding anything herein or in any of the other Loan Documents
to the contrary, no provision contained herein or therein which purports to
obligate Borrower to pay any amount of interest or any fees, costs or expenses
which are in excess of the maximum permitted by applicable law, shall be
effective to the extent it calls for the payment of any interest or other amount
in excess of such maximum. All agreements between Borrower and Lender, whether
now existing or hereafter arising and whether written or oral, are hereby
limited so that in no contingency, whether by reason of demand for payment or
acceleration of the maturity hereof or otherwise, shall the interest contracted
for, charged or received by ▇▇▇▇▇▇ exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest would otherwise
be payable to Lender in excess of the maximum lawful amount, the interest
payable to Lender shall be reduced to the maximum amount permitted under
applicable law; and if from any circumstance Lender shall ever receive anything
of value deemed interest by applicable law in excess of the maximum lawful
amount, an amount equal to any excessive interest shall, at the option of
Lender, be refunded to Borrower or be applied to the reduction of the principal
hereof, without a Make Whole Premium and not to the payment of interest or, if
such excessive interest exceeds the unpaid balance of principal hereof such
excess shall be refunded to Borrower. All interest paid or agreed to be paid to
Lender shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal (including the period of any renewal or extension hereof) so that the
interest herein for such full period shall not exceed the maximum amount
permitted by applicable law. This paragraph shall control all agreements between
Borrower and Lender.
7. Borrower and any endorsers or guarantors waive presentment, protest
and demand, notice of protest, demand and dishonor and nonpayment, and notice of
default, notice of intent to accelerate maturity, notice of acceleration and
maturity, and agree the Maturity Date of this Note or any installment may be
extended without affecting any liability hereunder, and further promise to pay
all reasonable costs and expenses, including but not limited to, reasonable
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attorney's fees incurred by ▇▇▇▇▇▇ in connection with any default or in any
proceeding to interpret and/or enforce any provision of the Loan Documents. No
release of Borrower from liability hereunder shall release any other maker,
endorser or guarantor hereof.
8. This Note is secured by the Loan Documents creating among other things
legal and valid encumbrances on and an assignment of all of ▇▇▇▇▇▇▇▇'s interest
in any Leases of the Premises located in the county of Tarrant, state of Texas.
Capitalized terms used herein and not otherwise defined shall have those
meanings given to them in the Loan Documents. In no event shall such documents
be construed inconsistently with the terms of this Note, and in the event of any
discrepancy between any such documents and this Note, the terms hereof shall
govern. The proceeds of this Note are to be used for business, commercial,
investment or other similar purposes, and no portion thereof will be used for
any personal, family or household use. This Note shall be governed by and
construed in accordance with the laws of the State where the Premises is
located, without regard to its conflict of law principles.
9. Notwithstanding any provision to the contrary in this Note or the Loan
Documents and except as otherwise provided for below, the liability of Borrower
and any general partner of Borrower under the Loan Documents shall be limited to
the interest of ▇▇▇▇▇▇▇▇ and any general partner of Borrower in the Premises and
the Rents. In the event of foreclosure of the liens evidenced by the Loan
Documents, no judgment for any deficiency upon the Indebtedness evidenced by the
Loan Documents shall be sought or obtained by ▇▇▇▇▇▇ against Borrower or any
general partner of Borrower. Nothing herein shall in any manner limit or impair
(i) the lien or enforcement of the Loan Documents pursuant to the terms thereof
or (ii) the obligations of any indemnitor or guarantor, if any.
Notwithstanding any provision hereinabove to the contrary, Borrower and any
general partner of Borrower shall be personally liable to Lender for:
(a) any loss or damage to Lender arising from (i) the sale or forfeiture
of the Premises resulting from ▇▇▇▇▇▇▇▇'s failure to pay any of the
taxes, assessments or charges specified in the Loan Documents or (ii)
Borrower's failure to insure the Premises in compliance with the
provisions of the Loan Documents;
(b) any event or circumstance for which Borrower indemnifies Lender under
the Environmental Indemnity;
(c) nonpayment of taxes, assessments, insurance premiums and utilities for
the Premises and any penalty or late charge associated with nonpayment
thereof;
(d) material failure to manage, operate, and maintain the Premises in a
commercially reasonable manner for similar property types in the
surrounding geographic area;
(e) any sums expended by ▇▇▇▇▇▇ in fulfilling the obligations of Borrower
as lessor under any Lease of the Premises prior to a sale of the
Premises pursuant to foreclosure or power of sale, a bona fide sale
(permitted by the terms of paragraph 2(f) of the Deed of Trust (it
being agreed that "Deed of Trust" as used herein shall be construed to
mean "mortgage" or "deed of trust" or "trust deed" as the context so
requires) or consented to in writing by ▇▇▇▇▇▇) to an unrelated third
party or
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upon conveyance to Lender of the Premises by a deed acceptable to
Lender in form and content (each of which shall be referred to as a
"SALE" for purposes of this paragraph) or expended by ▇▇▇▇▇▇ after a
Sale of the Premises for obligations of Borrower which arose prior to
a Sale of the Premises;
Borrower's personal liability for items specified in (c), (d) and (e)
above shall be limited to the amount of rents, issues, proceeds and
profits from the Premises ("RENTS AND PROFITS") received by Borrower
for the twenty-four (24) months preceding an Event of Default and
thereafter; but less any such Rents and Profits applied to (A) payment
of principal, interest and other charges when due under the Loan
Documents, or (B) payment of expenses for the operation, maintenance,
taxes, assessments, utility charges and insurance of the Premises
including sufficient reserves for the same or replacements or renewals
thereof ("OPERATION EXPENSE(S)") provided that (x) Borrower has
furnished Lender with evidence reasonably satisfactory to Lender of
the Operation Expenses and payment thereof, and (y) any payments to
parties related to Borrower shall be considered an Operation Expense
only to the extent that the amount expended for the Operation Expense
does not exceed the then current market rate for such Operation
Expense.
(f) any rents or other income regardless of type or source of payment or
other considerations in lieu thereof (including, but not limited to,
common area maintenance charges, lease termination payments, refunds
of any type, prepayment of rents, settlements of litigation, or
settlements of past due rents) from the Premises which Borrower has
received or will receive after an Event of Default under the Loan
Documents which are not applied to (A) payment of principal, interest
and other charges when due under the Loan Documents or (B) payment of
Operation Expenses provided that (x) Borrower has furnished Lender
with evidence reasonably satisfactory to Lender of the Operation
Expenses and payment thereof, and (y) any payments to parties related
to Borrower shall be considered an Operation Expense only to the
extent that the amount expended for the Operation Expense does not
exceed the then current market rate for such Operation Expense;
(g) any security deposits of tenants not otherwise applied in accordance
with the terms of the Lease(s), together with any interest on such
security deposits required by law or the leases, not turned over to
Lender upon conveyance of the Premises to Lender pursuant to
foreclosure or power of sale or by a deed acceptable to Lender in form
and content;
(h) misapplication or misappropriation of tax reserve accounts, tenant
improvement reserve accounts, security deposits, prepaid rents or
other similar sums paid to or held by Borrower or any other entity or
person in connection with the operation of the Premises;
(i) any insurance or condemnation proceeds or other similar funds or
payments applied by Borrower in a manner other than as expressly
provided in the Loan Documents; and
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(j) any loss or damage to Lender arising from any fraud or willful
misrepresentation by or on behalf of Borrower, Interest Owner or any
guarantor regarding the Premises, the making or delivery of any of the
Loan Documents or in any materials or information provided by or on
behalf of Borrower, Interest Owner or guarantor, if any, in connection
with the Loan.
Notwithstanding anything contained in paragraphs 9(a)(i) and 9(c)
hereinabove as it relates solely to taxes, assessments and insurance
premiums, to the extent Lender is impounding for taxes, assessments and
insurance premiums in accordance with the Loan Documents and Borrower has
fully complied with all terms and conditions of the Loan Documents relating
to impounding for the same, then Borrower shall not be personally liable
for ▇▇▇▇▇▇'s failure to apply any of said impound amounts held by Lender in
accordance with the Loan Documents.
Notwithstanding anything to the contrary in the Loan Documents, the
limitation on liability contained in the first paragraph of this paragraph 9
SHALL BECOME NULL AND VOID and shall be of no further force and effect in the
event of any breach or violation of paragraph 2(f) (due on sale or encumbrance)
of the Deed of Trust, other than (i) the filing of a nonmaterial mechanic's lien
affecting the Premises or a mechanic's lien affecting the Premises for which
Borrower has complied with the provisions of paragraph 1(e) of the Deed of
Trust, or (ii) the granting of any utility or other nonmaterial easement or
servitude burdening the Premises, or (iii) any transfer or encumbrance of a
nonmaterial economic interest in the Premises not otherwise set forth in (i) or
(ii).
10. If more than one, all obligations and agreements of Borrower and of
any general partners of Borrower are joint and several.
11. This Note may not be changed or terminated orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. All of the rights,
privileges and obligations hereunder shall inure to the benefit of the heirs,
successors and assigns of ▇▇▇▇▇▇ and shall bind the heirs and permitted
successors and assigns of ▇▇▇▇▇▇▇▇.
12. If any provision of this Note shall, for any reason, be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Note shall be construed as if such invalid
or unenforceable provision had never been contained herein.
13. This Note may be executed in counterparts, each of which shall be
deemed an original; and such counterparts when taken together shall constitute
but one agreement.
14. Provided the following requirements are met, ▇▇▇▇▇▇ agrees to make an
additional advance of funds ("Second Funding") in the following manner:
(a) The amount of $17,100,000 shall be funded on the Closing Date
("INITIAL FUNDING").
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(b) Provided no Event of Default has occurred and is continuing under the
Loan Documents, prior to October 7, 2004, Borrower may request the
Second Funding in a single disbursement of up to $2,517,000.00 ("LOAN
INCREASE") (for a combined loan amount not to exceed $19,617,000)
provided the following conditions are satisfied (the following
conditions being the "LOAN INCREASE CONDITIONS"):
(i) the Loan Increase occurs on or before October 7, 2004;
(ii) the Premises is at least 94% occupied with tenants in
Occupancy (hereinafter defined) and paying full rent;
(iii) the debt service coverage based on 94% Occupancy, as
determined by Lender in its sole discretion, on the combined loan
amount must equal 3.00 times or greater;
(iv) an endorsement to ▇▇▇▇▇▇'s Loan Policy pursuant to Texas
Title Insurance Regulation Procedural Rule P-8(b)(2) deleting the
pending disbursements exception and the mechanic's lien exception and,
at ▇▇▇▇▇▇'s option, a down date endorsement covering ▇▇▇▇▇▇'s Loan
Policy showing no further encumbrances other than the permitted
encumbrances stated in the Deed of Trust;
(v) receipt and approval by ▇▇▇▇▇▇ of all leases for the
Premises executed following the Initial Funding and, to the extent
required by ▇▇▇▇▇▇, lessee estoppel letters and Subordination,
Non-Disturbance and Attornment Agreements executed on Lender's current
forms acceptable to Lender and unconditional certificates of occupancy
for such newly leased space(s);
(vi) the 13,028 square foot building which was incomplete as
of the Closing Date (the "INCOMPLETE BUILDING") shall have been
completed and an unconditional certificate of occupancy issued for the
Incomplete Building;
(vii) Borrower and Guarantor shall have executed and delivered
to Lender any amendments to the Loan Documents as may be required by
▇▇▇▇▇▇, in form and substance satisfactory to Lender which among other
things, adjusts the Loan Amount and the monthly interest payment to
reflect the Second Funding;
(viii) all reasonable fees and costs, including, but not
exclusive of, title premiums, survey charges, outside counsel if
deemed necessary by ▇▇▇▇▇▇, associated with the Loan Increase shall
have been paid by ▇▇▇▇▇▇▇▇; and
(ix) revised evidence of insurance is received and approved by
Lender updating the loss of rents coverage based on the newly leased
space, increasing the building coverage and eliminating the builder's
risk and contractor's liability coverage.
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In order for a lease to be included in Lender's determination of the
Occupancy of the Premises (herein referred to as "OCCUPANCY"), the lease shall
(i) be to a lessee (other than Borrower or any person or entity affiliated with
Borrower) acceptable to Lender; (ii) be in form and substance acceptable to
Lender; (iii) have at least three (3) years remaining prior to the expiration of
its term; (iv) have no material uncured defaults; (v) the lessee under the lease
shall be in full, physical occupancy and operation at the Premises; and (vi) the
lessee under the lease shall (a) have unconditionally accepted the leased
premises without reservation (other than minor punch list items), (b) have
commenced paying all rents in full without deduction, offset, concession or
deferment, and (c) not have given any notice of any default by Borrower (as
landlord) under the lease, notice of termination or intent to vacate.
In the event Borrower fails to satisfy the Loan Increase Conditions and the
Second Funding does not occur on or before October 7, 2004, then, provided no
Event of Default has occurred under the Loan Documents, Lender will extend the
October 7, 2004 date to December 7, 2004 if Lender, in its reasonable judgment,
determines that (i) Borrower has made good faith and diligent efforts to satisfy
the Loan Increase Conditions, and (ii) Borrower's failure to timely satisfy the
Loan Increase Conditions was the result of the failure of ASG Watauga Pavilion,
Ltd. ("Seller") to timely perform Seller's obligations under the purchase
agreement between Seller and Borrower, as determined in ▇▇▇▇▇▇'s sole
discretion, for the Incomplete Building. Any such extension may, at ▇▇▇▇▇▇'s
sole discretion, be conditioned upon payment to Lender of a per diem fee
calculated to compensate Lender for Lender's daily loss of interest income
commencing on October 7, 2004 and continuing through the date the Loan Increase
Conditions are satisfied and the Second Funding occurs.
In the event that the Loan Increase of $2,517,000 is not funded in its
entirety on or before December 7, 2004, Lender shall have no further obligation
to fund the Loan Increase and Borrower shall be obligated to either: (i) pay a
prepayment penalty at the greater of 1% or reinvestment to U.S. Treasuries on
the unfunded portion of the Loan Increase; or (ii) provide to Lender additional
collateral in the form of a shopping center (a) with a value, as determined by
Lender, which when combined with the value of the Premises for the Loan does not
exceed 60% loan to value, and (b) such that annual net operating income for the
total security for the Loan from all approved Leases (based on 94% Occupancy) in
effect on the additional collateral and the Premises after deduction for an
annual reserve and management fee equals or exceeds 3.00 times the sum of the
annual installment payments on the Loan, as determined by Lender. Borrower
authorizes ▇▇▇▇▇▇ to obtain an appraisal, property physical condition report and
Phase I report ("REPORTS") of the additional collateral from engineers and/or
consultants acceptable to Lender if Borrower chooses option (ii). The cost of
such Reports shall be paid by ▇▇▇▇▇▇▇▇. The additional collateral must be a
property type that is acceptable to Lender with a geographic location and market
fundamentals acceptable to Lender, in ▇▇▇▇▇▇'s sole discretion. Lender's
approval of the additional collateral shall also be conditioned upon Borrower's
satisfaction of Lender's: (i) then existing underwriting criteria for the
property type in question, which underwriting criteria shall include, but not be
limited to, Lender's evaluation of the then current financial performance and
projected risk of the additional collateral which shall encompass various
factors, including but not limited to, the financial strength, creditworthiness
and stability of tenants, frequency of tenant rollover; and (ii) then existing
closing requirements. Borrower shall pay to Lender a processing fee for the
handling of the closing of the additional collateral equal to $10,000.
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IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Note to be duly executed and
delivered as of the date first set forth above.
(REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURES ON NEXT PAGE
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SIGNATURE PAGE OF BORROWER TO
SECURED PROMISSORY NOTE
INLAND WESTERN WATAUGA LIMITED
PARTNERSHIP, an Illinois limited partnership
By: INLAND WESTERN WATAUGA GP, L.L.C., a
Delaware limited liability company, its General
Partner
By: INLAND WESTERN RETAIL REAL
ESTATE TRUST, INC., a Maryland
corporation, its Sole Member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: asst. Secretary
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