10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003 OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
Commission File Number: 1-12928

AGREE REALTY CORPORATION

(Exact name of Registrant as specified in its charter)

Maryland	38-3148187
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
31850 Northwestern Highway Farmington Hills, Michigan 48334 (Address of principal executive offices)	(248) 737-4190 (Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

	Name of each exchange on
Title of each class	which registered
Common Stock, $.0001 par value	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:

None

(Title of Class)

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, and (2) has been subject to such filing requirements for the past 90 days.  Yes  ü                No      

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.       

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes  ü                No      

The aggregate market value of the Registrant’s shares of common stock held by non-affiliates was approximately $108,892,877 as of June 30, 2003, based on the closing price of $24.31 on the NYSE on that date.

As of March 8, 2004, the number of shares of common stock of the Registrant outstanding was 6,466,971.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Incorporated into Form 10-K
Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on May 10, 2004	Part III Items 10-13

TABLE OF CONTENTS

PART 1
	Item 1. BUSINESS
	Item 2. PROPERTIES
	Item 3. LEGAL PROCEEDINGS
	Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Part II
	Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	Item 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 7A QUANTITATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISK
	Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	Item 9A CONTROLS AND PROCEDURES
PART III
	Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	Item 11. EXECUTIVE COMPENSATION
	Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	Item 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
SIGNATURES
Report of Independent Certified Public Accountants
	Consolidated Balance Sheets
	Consolidated Statements of Income
	Consolidated Statements of Stockholders’ Equity
	Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation December 31, 2003
Indemnity Deed of Trust Agreement - Columbia
Indemnity Deed of Trust Agreement - Milestone Ctr.
Mortgage and Security Agreement dated 10/31/2003
Deed of Trust and Security Agreement
CEO and CFO Code of Ethics
Subsidiaries
Consent of BDO Siedman, LLP
Certification of Richard Agree, CEO
Certification of Kenneth Howe, CFO
Certification of Richard Agree, CEO
Certification of Kenneth Howe, CFO

TABLE OF CONTENTS

		Page
		Numbers
	Part I
Item 1.	Business		4
Item 2.	Properties		14
Item 3.	Legal Proceedings		24
Item 4.	Submission of Matters to a Vote of Security Holders		24
	Part II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		24
Item 6.	Selected Financial Data		26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 7A	Quantitative and Qualitative Disclosures About Market Risk		34
Item 8.	Financial Statements and Supplementary Data		35
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		35
Item 9A	Controls and Procedures		35
	Part III
Item 10.	Directors and Executive Officers of the Registrant		35
Item 11.	Executive Compensation		36
Item 12.	Security Ownership of Certain Beneficial Owners and Management		36
Item 13.	Certain Relationships and Related Transactions		36
Item 14.	Principal Accountant Fees and Services		37
	Part IV
Item 15.	Exhibits, Financial Statements, Schedules and Reports on Form 8-K		37
Signatures			42

PART 1

FORWARD LOOKING STATEMENTS

     We have made statements in this Form 10-K that are “forward- Looking” in that they do not discuss historical facts but instead note future expectations, projections, intentions or other items relating to the future.

     Forward-looking statements, which are generally prefaced by the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar terms, are subject to known and unknown risks, uncertainties and other facts that may cause our actual results or performance to differ materially from those contemplated by the forward-looking statements. Many of those factors are noted in conjunction with the forward-looking statements in the text. Other important factors that could cause our actual results to differ include:

• Our inability to effect the development or acquisition of properties on favorable terms.

• The effect of economic conditions. If an economic downturn occurs, any corresponding decrease in disposable income could result in consumers being less willing to purchase goods from our tenants which could adversely affect our financial condition and results of operations. Our financial condition and results of operations could also be adversely affected if our tenants are otherwise unable to make lease payments or fail to renew their leases.

• Our inability to obtain long-term financing at interest rates that will allow us to offer attractive rental rates to our tenants in order to continue the development or acquisition of retail properties leased to national tenants on a long-term basis.

• Actions of our competitors. We seek to remain competitive in the development of real estate assets in the markets that we currently serve. With regard to our acquisition of properties, we compete with insurance companies, credit companies, pension funds, private individuals, investment companies and other REITs, some of which have greater resources than we do.

• Failure to qualify as a REIT. Although we believe that we were organized and have been operating in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, we cannot assure you that we will continue to qualify as a REIT.

• Changes in government regulations, tax rates and similar matters, For example, changes in real estate and zoning laws, environmental uncertainties and natural disasters could adversely affect our financial condition and results of operations.

     Other risk uncertainties and factors that could cause actual results to differ materially from those projected are discussed in the “Risk Factors” section of this Form 10-K.

     We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of

these risks, uncertainties and assumptions, the forward-looking events discussed in or incorporated by reference into this Form 10-K might not occur.

     References herein to the “Company” include Agree Realty Corporation, together with its wholly-owned subsidiaries and its majority owned operating partnership, Agree Limited Partnership (the “Operating Partnership”), unless the context otherwise requires.

Item 1. BUSINESS

General

     Agree Realty Corporation is a fully-integrated, self-administered and self-managed real estate investment trust (a “REIT”) that focuses primarily on the development, acquisition and ownership of retail properties net leased to national tenants. We were formed in December 1993 to continue and expand the retail business founded in 1971 by our current President and Chairman, Richard Agree. We specialize in building properties for national retailers who have signed long-term net leases prior to commencement of construction. All of our freestanding property tenants and most of our community shopping center tenants have triple-net leases which typically require the tenant to be responsible for property operating expenses including property taxes, insurance and maintenance. We believe this strategy provides us with a generally consistent source of income and cash for distributions and also provides opportunities for development of additional properties at attractive returns on investment, without the risks associated with speculative development.

     At December 31, 2003, our portfolio consisted of 50 properties, owned either directly or through joint ventures, located in 13 states and contained an aggregate of approximately 3.5 million square feet of gross leasable area. Our portfolio includes 37 freestanding net leased properties and 13 community shopping centers that as of December 31, 2003 were 97% leased with a weighted average lease term of approximately 11.9 years. As of December 31, 2003, approximately 67% of our annualized lease revenue is derived from our top three tenants: Borders Group, Inc. (Borders) – 33%, Walgreen Co. (Walgreen) – 17% and Kmart Corporation (Kmart) — 17%. As of December 31, 2003 approximately 88% of our annualized lease revenue is derived from national tenants.

     We expect to continue to grow our asset base primarily through the development of new retail properties that are pre-leased on a long-term basis to national tenants. Since our initial public offering in 1994, we have developed 27 properties, one of which we sold in 2003. We developed 31 of our 37 freestanding properties and all 13 of our community shopping centers. We focus on development because we believe it generally provides us a higher return on investment than the acquisition of similarly located properties. We expect to continue to expand our tenant relationships and diversify our tenant base to include other quality national tenants.

Growth Strategy

     Our growth strategy is to continue to develop retail properties pre-leased on a long-term basis to national tenants. We believe that a development strategy combined with substantial pre-leasing will produce

superior risk adjusted returns. To effect this strategy, we first identify a land parcel that we believe is an attractive retail location for one of our tenant relationships. The location must be in a concentrated retail corridor, have high traffic counts, good visibility and demographics compatible with the needs of the particular retail tenant. Then we propose to that tenant that we execute a long-term net lease for the finished development on that site.

     Once the lease is executed, we close on the land and pursue all the necessary approvals to begin development. We direct all aspects of the development, including construction, design, leasing and management. Property management and the majority of the leasing activities are handled directly by our personnel. We believe that this hands-on approach to development and property management enhances our ability to maximize the long-term value of our properties.

Financing Strategy

     The majority of our indebtedness is fixed rate, non-recourse and long-term in nature. Whenever possible, we use long-term financing for our properties to match the underlying long-term leases. As of December 31, 2003, the average weighted maturity of our long- term debt was 16.4 years. We intend to limit our floating rate debt to borrowings under our credit facilities, which are primarily used to finance new development and acquisitions. Once development of a project is completed, we typically refinance this floating rate debt with long-term, fixed rate, non-recourse debt. We intend to maintain a ratio of total indebtedness (including construction and acquisition financing) to market capitalization of 65% or less.

     We may from time to time re-evaluate our borrowing policies in light of the then current economic conditions, relative costs of debt and equity, capital, market value of properties, growth and acquisition opportunities and other factors. There is no contractual limit on our ratio of total indebtedness to total market capitalization, and accordingly, we may modify our borrowing policy and may increase or decrease our ratio of debt to market capitalization without stockholder approval.

Property Management

     We maintain an active leasing and capital improvement program that, combined with the quality and locations of our properties, has made our properties attractive to tenants. We intend to continue to hold our properties for long-term investment and accordingly, place a strong emphasis on quality construction and an on-going program of regular maintenance. Our properties are designed to require minimal capital improvements other than renovations or expansions paid for by tenants. At our 13 community shopping centers properties, we sub-contract on-site functions such as maintenance, landscaping, snow removal, sweeping, plumbing and electrical and, to the extent permitted by the respective leases, our cost of these functions is reimbursed by our tenants. Personnel from our corporate headquarters conduct regular inspections of each property and maintain regular contact with major tenants.

     We have a management information system designed to provide management with the operating data necessary to make informed business decisions on a timely basis. This computer system provides us immediate access to store availability, lease data, tenants’ sales history, cash

flow budgets and forecasts, and enables us to maximize cash flow from operations and closely monitor corporate expenses.

Agree Limited Partnership

     Our assets are held by, and all of our operations are conducted through, Agree Limited Partnership (Operating Partnership), of which we are the sole general partner and held a 90.52% interest as of December 31, 2003. Under the partnership agreement of the Operating Partnership, we, as the sole general partner, have exclusive responsibility and discretion in the management and control of the Operating Partnership.

Recent Developments

     During 2003 we completed the development of two (2) freestanding net leased properties that added 17,986 square feet of gross leasable area to our operating portfolio and cost approximately $4.5 million. The properties are leased to Walgreen Co. and Citizens Bank.

     During 2003 we acquired a freestanding net leased property that added 11,180 square feet of gross leasable area to our operating portfolio and cost approximately $3.7 million. The property is located in Canton Township, Michigan and is leased to Rite Aid of Michigan, Inc.

     During 2003, we also acquired the interest of our joint venture partner in two (2) Joint Venture Properties and now own 100% of the properties. The properties are located in Ann Arbor, Michigan and Tulsa, Oklahoma. The cost to acquire the Ann Arbor interest was approximately $7.7 million and was financed with a fixed rate self- amortizing mortgage at a rate of 6.50%. The cost to acquire the Tulsa interest was approximately $4.8 million and was funded using our credit facility.

     During 2003 we sold a community shopping center located in Winter Garden, Florida. We developed the 233,512 square foot Kmart anchored shopping center in 1988. The property was sold to a private investor for approximately $8.5 million.

     Our headquarters are located at 31850 Northwestern Highway, Farmington Hills, MI 48334 and our telephone number is (248) 737-4190. Our web site address is www.agreerealty.com. Agree Realty Corporation’s SEC filings can be accessed through this site.

Risk Factors

     General

     We rely on a few major tenants. As of December 31, 2004, we derived approximately 67% of our annualized base rent from three major tenants, Borders, Kmart and Walgreen. In the event of a default by any of these tenants under their leases, we may experience delays in enforcing our rights as lessor and may incur substantial costs in protecting our investment. The bankruptcy or insolvency of any of the major tenants would be likely to have a material adverse effect on the properties affected and the income produced by those properties and correspondingly our ability to make distributions.

     In the event that certain tenants cease to occupy a property, although under most circumstances such a tenant would remain liable for its lease payments, such an action may result in certain other tenants

having the right to terminate their leases at the affected property, which could adversely affect the future income from that property. As of December 31, 2003, 13 of our properties had tenants with those provisions in their leases.

     We could be adversely affected by a tenant’s bankruptcy. If a tenant becomes bankrupt or insolvent, that could diminish the income we expect from that tenant’s leases. We may not be able to evict a tenant solely because of its bankruptcy. On the other hand, a bankruptcy court might authorize the tenant to terminate its leases with us. If that happens, our claim against the bankruptcy tenant for unpaid future rent would be subject to statutory limitations that might be substantially less than the remaining rent owed under the leases. In addition, any claim we have for unpaid past rent would likely not be paid in full. One of our major tenants, Kmart, recently emerged from bankruptcy. As part of their plan of reorganization, Kmart terminated one of our leases and modified one other lease. We cannot predict what effect a future Kmart bankruptcy or the bankruptcy of any other major tenant will have on us. A failure by Kmart to successfully implement its reorganization plan or to continue as a going concern could result in Kmart’s inability to maintain its lease payments to us or to attempt to renegotiate or terminate leases.

     Risks involved in single tenant leases. We focus our development activities on net leased real estate or interests therein. Because our properties are generally leased to single tenants, the financial failure of or other default by a tenant resulting in the termination of a lease is likely to cause a significant reduction in our operating cash flow and might decrease the value of the property leased to such tenant.

     Risks associated with borrowing, including loss of properties in the event of a foreclosure. At December 31, 2003, our ratio of indebtedness to market capitalization was approximately 30%. Certain of our properties may have a ratio of long-term debt to tangible asset value exceeding 50%. The use of leverage presents an additional element of risk in the event that (1) the cash flow from lease payments on our properties is insufficient to meet debt obligations, (2) we are unable to refinance our debt obligations as necessary or on as favorable terms or (3) there is an increase in interest rates. If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the property could be foreclosed upon with a consequent loss of income and asset value to Agree. Under the “cross-default” provisions contained in mortgages encumbering some of our properties, a default by Agree under its mortgage with a lender would result in a default by Agree under mortgages held by the same lender on other properties.

     Risks associated with our development and acquisition activities. We intend to continue development of new properties and to consider possible acquisitions of existing properties. New project development is subject to a number of risks, including risks of construction delays or cost overruns that may increase project costs, risks that the properties will not achieve anticipated occupancy levels or sustain anticipated rent levels, and new project commencement risks such as receipt of zoning, occupancy and other required governmental permits and authorizations and the incurrence of development costs in connection with projects that are not pursued to completion. In addition, we anticipate that our new development will be financed under lines of credit or other forms of construction financing that will result in a risk that permanent financing on newly developed projects might not be

available or would be available only on disadvantageous terms. In addition, the fact that we must distribute 90% of our taxable income in order to maintain our qualification as a REIT will limit our ability to rely upon income from operations or cash flow from operations to finance new development or acquisitions. As a result, if permanent debt or equity financing was not available on acceptable terms to refinance new development or acquisitions undertaken without permanent financing, further development activities or acquisitions might be curtailed or cash available for distribution might be adversely affected. Acquisitions entail risks that investments will fail to perform in accordance with expectations and that judgments with respect to the costs of improvements to bring an acquired property up to standards established for the market position intended for that property will prove inaccurate, as well as general investment risks associated with any new real estate investment.

     Our portfolio has limited geographic diversification. Our properties are located primarily in the Midwestern United States and Florida. The concentration of our properties in a limited number of geographic regions creates the risk that, should these regions experience an economic downturn, our operations may be adversely affected. For example, 26 of our properties are located in Michigan. Should Michigan experience an economic downturn, our operations and our rentals from our Michigan properties could be adversely affected.

     Dependence on key personnel. We are dependent on the efforts of our executive officers and directors. The loss of one or more of our executive officers or directors would likely have a material adverse effect on our future development or acquisition operations, which could adversely affect the market price of our common stock. We do not presently have key-man life insurance for any of our employees.

     We are not limited by our organization documents as to the amount of debt we may incur. We intend to maintain a ratio of total indebtedness (including construction or acquisition financing) to market capitalization of 65% or less. Nevertheless, we may operate with debt levels which are in excess of 65% of market capitalization for extended periods of time. Our organization documents contain no limitation on the amount or percentage of indebtedness which we may incur. Therefore, our board of directors, without a vote of the stockholders, could alter the general policy on borrowings at any time. If our debt capitalization policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our operating cash flow and our ability to make expected distributions to stockholders, and could result in an increased risk of default on our obligations.

     We can change our investment and financing policies without stockholder approval. Our investment and financing policies, and our policies with respect to certain other activities, including our growth, debt capitalization, distributions, REIT status and investment and operating policies, are determined by our Board of Directors. Although we have no present intention to do so, these policies may be amended or revised from time to time at the discretion of our Board of Directors without a vote of our stockholders.

     Competition. We face competition in seeking properties for acquisition and tenants who will lease space in these properties from insurance companies, credit companies, pension funds, private individuals, investment companies and other REITs, many of which have

greater financial and other resources than we do. There can be no assurance that the Company will be able to successfully compete with such entities in its development, acquisition and leasing activities in the future.

     Uncertainties relating to lease renewals and re-letting of space. We are subject to the risks that, upon expiration of leases for space located in our properties, the premises may not be re-let or the terms of re-letting (including the cost of concessions to tenants) may be less favorable than current lease terms. If we are unable to re-let promptly all or a substantial portion of our retailers or if the rental rates upon such re-letting were significantly lower than expected rates, our net income and ability to make expected distributions to shareholders would be adversely affected. There can be no assurance that we will be able to retain tenants in any of our properties upon the expiration of their leases.

     We must obtain new financing in order to grow. As a REIT, we are required to distribute at least 90% of our net income to stockholders in the form of dividends. This means we are limited in our ability to use internal capital to acquire properties and must continually raise new capital in order to continue to grow and diversify our real estate portfolio. Our ability to raise new capital depends in part on factors beyond our control, including conditions in equity and credit markets, conditions in the retail industry and the performance of REITs generally. We continually consider and evaluate a variety of potential transactions to raise additional capital, but we cannot assure that attractive alternatives will always be available to us, nor that our common share price will increase or remain at a level that will permit us to continue to raise equity capital privately or publicly.

     Risks Associated With Investment In Real Estate

     There are risks associated with owning and leasing real estate. Although our lease terms obligate the tenants to bear substantially all of the costs of operating our properties, investing in real estate involves a number of risks, including:

• The risk that tenants will not perform under their leases, reducing our income from the leases or requiring us to assume the cost of performing obligations (such as taxes, insurance and maintenance) that are the tenant’s responsibility under the lease.

• The risk that changes in economic conditions or real estate markets may adversely affect the value of our properties.

• The risk that local conditions (such as oversupply of similar properties) could adversely affect the value of our properties.

• The risk that we may not always be able to lease properties at favorable rates.

• The risk that we may not always be able to sell a property when we desire to do so at a favorable price.

• The risk of changes in tax, zoning or other laws could make properties less attractive or less profitable.

If a tenant fails to perform on its lease covenants, that would not excuse us from meeting any mortgage debt obligation secured by the property and could require us to fund reserves in favor of our mortgage lenders, thereby reducing funds available for payment of dividends on our shares of common stock. We cannot be assured that tenants will elect to renew their leases when the terms expire. If a tenant does not renew its lease or if a tenant defaults on its lease obligations, there is no assurance we could obtain a substitute tenant on acceptable terms. If we cannot obtain another tenant with comparable structural needs, we may be required to modify the property for a different use, which may involve a significant capital expenditure and a delay in re-leasing the property.

     Some potential losses are not covered by insurance. Our leases require the tenants to carry comprehensive liability, casualty, workers’ compensation, extended coverage and rental loss insurance on our properties. We believe the required coverage is of the type, and amount, customarily obtained by an owner of similar properties. We believe all of our properties are adequately insured. However, there are some types of losses, such as terrorist acts or catastrophic acts of nature, for which we or our tenants cannot obtain insurance at an acceptable cost. If there is an uninsured loss or a loss in excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we have invested in the property. We would, however, remain obligated to repay any mortgage indebtedness or other obligations related to the property.

     Potential liability for environmental contamination could result in substantial costs. Under federal, state and local environmental laws, we may be required to investigate and clean up any release of hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or actual responsibility, simply because of our current or past ownership of the real estate. If unidentified environmental problems arise, we may have to make substantial payments, which could adversely affect our cash flow and our ability to make distributions to our stockholders. This potential liability results from the fact that:

• As owner we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination.

• The law may impose clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination.

• Even if more than one person is responsible for the contamination, each person who shares legal liability under environmental laws may be held responsible for all of the clean-up costs.

• Governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs.

These costs could be substantial and in extreme cases could exceed the value of the contaminated property. The presence of hazardous

substances or petroleum products or the failure to properly remediate contamination may adversely affect our ability to borrow against, sell or lease an affected property. In addition, some environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination.

     Our leases require our tenants to operate the properties in compliance with environmental laws and to indemnify us against environmental liability arising from the operation of the properties. We believe all of our properties are in material compliance with environmental laws. However, we could be subject to strict liability under environmental laws because we own the properties. There is also a risk that tenants may not satisfy their environmental compliance and indemnification obligations under the leases. Any of these events could substantially increase our cost of operations, require us to fund environmental indemnities in favor of our secured lenders and reduce our ability to service our secured debt and pay dividends to stockholders and any debt security interest payments. Environmental problems at any properties could also put us in default under loans secured by those properties, as well as loans secured by unaffected properties.

     Tax Risks

     We will be subject to increased taxation if we fail to qualify as a REIT for federal income tax purposes. A REIT generally is not taxed at the corporate level on income it distributes to its stockholders, as long as it distributes annually at lease 90% of its taxable income to its stockholders. We have not requested and do not plan to request, a ruling from the Internal Revenue Service that we qualify as a REIT.

     If we fail to qualify as a REIT we will face tax consequences that will substantially reduce the funds available for payment of dividends:

• We would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to federal income tax at regular corporate rates.

• We could be subject to the federal alternative minimum tax and possibly increased state and local taxes.

• Unless we are entitled to relief under statutory provisions, we could not elect to be treated as a REIT for four taxable years following the year in which we were disqualified.

In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends (other than any mandatory dividends on any preferred shares we may offer). As a result of these factors, our failure to qualify as a REIT could adversely effect the market price for our common stock.

     Excessive non-real estate asset values may jeopardize our REIT status. In order to qualify as a REIT, at least 75% of the value of our assets must consist of investments in real estate, investments in other REITs, cash and cash equivalents, and government securities. Therefore, the value of any property that is not considered a real estate asset for federal income tax purposes must represent in the aggregate less than 25% of our total assets. In addition, under federal income tax law, we may not own securities in any one company (other than a REIT, a qualified REIT subsidiary or a taxable REIT subsidiary) which represent

in excess of 10% of the voting securities or 10% of the value of all securities of any one company, or which have, in the aggregate, a value in excess of 5% of our total assets, and we may not own securities of one or more taxable REIT subsidiaries which have, in the aggregate, a value in excess of 20% of our total assets. We may invest in securities of another REIT, and our investment may represent in excess of 10% of the voting securities or 10% of the value of the securities of the other REIT. If the other REIT were to lose its REIT status during a taxable year in which our investment represented in excess of 10% of the voting securities or 10% of the value of the securities of the other REIT as of the close of a calendar quarter, we will lose our REIT status.

     The 25%, 20%, 10% and 5% tests are determined at the end of each calendar quarter. If we fail to meet any such test at the end of any calendar quarter, we will cease to qualify as a REIT.

     We may have to borrow funds or sell assets to meet our distribution requirements. Subject to some adjustments that are unique to REITs, a REIT generally must distribute 90% of its taxable income. For the purpose of determining taxable income, we may be required to accrue interest, rent and other items treated as earned for tax purposes but that we have not yet received. In addition, we may be required not to accrue as expenses for tax purposes some items which actually have been paid or some of our deductions might be disallowed by the Internal Revenue Service. As a result, we could have taxable income in excess of cash available for distribution. If this occurs, we may have to borrow funds or liquidate some of our assets in order to meet the distribution requirement applicable to a REIT.

     We may be subject to other tax liabilities. Even if we qualify as a REIT, we may be subject to some federal, state and local taxes on our income and property that could reduce operating cash flow.

     Changes in tax laws may prevent us from qualifying as a REIT. As we have previously described, we intend to qualify as a REIT for federal income tax purposes. However, this intended qualification is based on the tax laws that are currently in effect. We are unable to predict any future changes in the tax laws that would adversely affect our status as a REIT. If there is a change in the tax laws that prevents us from qualifying as a REIT or that requires REITs generally to pay corporate level income taxes, we may not be able to make the same level of distributions to our stockholders.

Major Tenants

     As of December 31, 2003, approximately 67% of our gross leasable area, including the Joint Venture Properties, was leased to Borders, Kmart and Walgreen and approximately 67% of total annualized base rents was attributable to these tenants. At December 31, 2003, Borders occupied approximately 28% of our gross leasable area, including the joint venture properties, and accounted for approximately 33% of the annualized base rent. At December 31, 2003, Walgreen Co. occupied approximately 5% of our gross leasable area, including the joint venture properties, and accounted for approximately 17% of the annualized base rent. At December 31, 2003, Kmart Corporation occupied approximately 33% of our gross leasable area, including the joint venture properties, and accounted for approximately 17% of the annualized base rent. No other tenant accounted for more than 10% of gross leasable area or annualized base rent in 2003. The loss of any of these anchor tenants

or the inability of any of them to pay rent would have an adverse effect on our business.

Tax Status

     We have operated and intend to operate in a manner to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain qualification as a REIT, we must, among other things, distribute at least 90% of our real estate investment trust income and meet certain other asset and income tests. Additionally, our charter limits ownership of the Company, directly or constructively, by any single person to 9.8% of the total number of outstanding shares, subject to certain exceptions. As a REIT, we are not subject to federal income tax with respect to that portion of its income that meets certain criteria and is distributed annually to the stockholders.

Competition

     We face competition in seeking properties for acquisition and tenants who will lease space in these properties from insurance companies, credit companies, pension funds, private individuals, investment companies and other REITs, many of which have greater financial and other resources than us. There can be no assurance that we will be able to successfully compete with such entities in our development, acquisition and leasing activities in the future.

Potential Environmental Risks

     Investments in real property create a potential for environmental liability on the part of the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. We have obtained a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted on each Property by independent environmental consultants. Furthermore, we have adopted a policy of conducting a Phase I environmental study on each property we acquire and if necessary conducting additional investigation as warranted.

     We conducted Phase I environmental studies on the two properties we developed and the one property we acquired in 2003. The results of these Phase I studies required the Company to perform a Limited Phase II environmental site assessment on 2 of the properties (which involves soil sampling or ground water analysis). The results of the Phase II environmental study conducted on the properties indicated that no further action was required. In addition, we have no knowledge of any hazardous substances existing on any of its properties in violation of any applicable laws; however, no assurance can be given that such substances are not located on any of the properties. We carry no insurance coverage for the types of environmental risks described above.

     We believe that we are in compliance, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Furthermore, we have not been notified by any governmental authority of any noncompliance, liability or other claim in connection with any of the properties.

Employees

     As of February 29, 2004, we employed eight persons. Employee responsibilities include accounting, construction, leasing, property coordination and administrative functions for the properties. Our employees are not covered by a collective bargaining agreement, and we consider our employee relations to be satisfactory.

Financial Information About Industry Segments

     We are in the business of development, acquisition and management of freestanding net leased properties and community shopping centers. We consider our activities to consist of a single industry segment. See the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for certain information required in Item 1.

Item 2. PROPERTIES

     Our properties consist of 37 freestanding net leased properties and 13 community shopping centers, that as of December 31, 2003 were 97% leased, with a weighted average lease term of 11.9 years. Approximately 88% of our base rental income was attributable to national retailers. Among these retailers are Borders, Walgreen and Kmart which, at December 31, 2003, collectively represented approximately 67% of our current base rental income. A majority of our properties were built for or are leased to national tenants who require a high quality location with strong retail characteristics. We developed 31 of our 37 freestanding properties and all 13 of our community shopping center properties. Five of our freestanding properties, although not built by us, were acquired as part of our relationship with Borders. Properties we have developed (including our community shopping centers) account for 89.3% of our contractual rent for 2004. Our 37 freestanding properties are comprised of 36 retail locations and Borders’ corporate headquarters.

     A substantial portion of our income consists of rent received under net leases. Most of the leases provide for the payment of fixed base rentals monthly in advance and for the payment by tenants of a pro rata share of the real estate taxes, insurance, utilities and common area maintenance of the shopping center as well as payment to us of a percentage of the tenant’s sales. We received percentage rents of $185,620, $247,994 and $413,058 for the fiscal years 2003, 2002 and 2001, respectively, and these amounts represented 0.7%, 1.0% and 1.8%, respectively, of our total revenue for these periods. Included in those amounts were percentage rents from Kmart of $106,282, $162,419 and $235,894 for fiscal years 2003, 2002 and 2001, respectively. Leases with Borders do not contain percentage rent provisions. Leases with Walgreen do contain percentage rent provisions; however no percentage rent was received from Walgreen during these periods. Some of our leases require us to make roof and structural repairs, as needed.

Major Tenants

     The following table sets forth certain information with respect to our major tenants:

			Annualized Base			Percent of Total
	Number		Rent as of			Annualized Base Rent as
	of Leases		December 31, 2003			of December 31, 2003
Borders		18	$	8,407,559	(1)		33	%
Walgreen		12		4,455,806			17
Kmart		14		4,428,587			17
Total		44	$	17,291,952			67	%

(1) Includes our percentage of base rent for each of the Joint Venture Properties

     Borders Group, Inc., (Borders), is a FORTUNE 500 company that trades on the New York Stock Exchange under the symbol “BGP”. Borders, is a leading global retailer of books, music, movies and other information and entertainment items. Headquartered in Ann Arbor, Michigan, Borders operates over 445 Borders Books and Music stores in the United States, as well as 37 international Borders stores, approximately 750 Waldenbooks locations and 36 Great Britain based Books etc. stores. BGI employs more than 32,000 people worldwide. We derived approximately 33% of our base rental income for the year ended December 31, 2003 from, and approximately 39% of our future minimum rentals are attributable to Borders. Borders has reported that its annual revenues for its 2002 fiscal year ended January 26, 2003 were $3,513,000,000 and its annual net income for 2002 was $111,700,000 and that it had total stockholders’ equity of $1,030,600,000. Borders posted revenues of approximately $3.4 billion in fiscal 2002.

     Walgreen is a leader of the U.S. chain drugstore industry and trades on the New York Stock Exchange under the symbol “WAG”. It operates over 4,290 stores in 44 states and Puerto Rico and has total assets of approximately $11.4 billion as of August 31, 2003. As of January 22, 2004, Walgreen had a Standard and Poor’s rating of A+ and a Moody’s rating of Aa3. We derived approximately 17% of our base rental income for the year ended December 31, 2003 from, and approximately 26% of our future minimum rentals are attributable to Walgreen. For the fiscal year ended August 31, 2003, Walgreen reported that its annual net sales were $32,505,000,000 and its annual net income was $1,175,700,000 and that it had shareholders’ equity of $7,195,700,000.

     We have fourteen leases with Kmart, a retailer that operates over 1,500 stores following its emergence from bankruptcy proceedings in May 2003 and trades on the NASDAQ under the symbol “KMRT”. Kmart’s principal business is general merchandise retailing through a chain of department stores. We derived approximately 17% of our base rental income for the year ended December 31, 2003 from, and approximately 15% of our future minimum rentals are attributable to, Kmart. In connection with its emergence from bankruptcy proceedings, Kmart was relieved of $7,969,000,000 of liabilities. As of October 29, 2003 Kmart had total liabilities of $4,410,000,000 and shareholders equity of $1,707,000,000. All of our Kmart properties are in the “Big K” format and these Kmart properties average 85,000 square feet per property.

     In May 2003 Kmart emerged from the bankruptcy proceeding which it had initiated in January 2002. Pursuant to the confirmed plan of reorganization, Kmart closed approximately 600 of its stores, including one of which was located on our property in Lakeland, Florida. Kmart vacated the premises in Lakeland, Florida in April 2003 and we are actively marketing the space formerly occupied by Kmart. Our annual rent from this property was approximately $480,000 and Kmart’s annual contribution under the lease for real estate taxes, insurance and common area maintenance was approximately $110,000. Certain tenants in the Lakeland, Florida community shopping center have co-tenancy clauses in their leases which provide either for modification of their rent to be based on gross sales or an option to terminate their lease when the Kmart store closed, if we are unable to obtain a replacement anchor tenant. As of February 29, 2004, none of these tenants have indicated that they will exercise their option to terminate their leases with us. We believe it will take between 9 and 15 months to re-let the Kmart location. In connection with the re-letting the Kmart location, we may have to agree to make capital expenditures with respect to the property. In addition, we have agreed to a rent reduction of $150,000 per year under a Kmart lease for a store in Perrysburg, Ohio. The rent reduction is for a 5-year period.

     The financial information set forth above with respect to Borders, Walgreen and Kmart was derived from the annual reports on Form 10-K filed by Borders and Walgreen with the SEC with respect to their 2002 and 2003 fiscal years and the quarterly report on form 10-Q filed by Kmart with the SEC with respect to the third quarter of 2003. Additional information regarding Borders, Kmart or Walgreen may be found in their respective public filings. These filings can be accessed at www.sec.gov.

Location of Properties in the Portfolio

				Total Gross		Percent of
	Number of			Leasable Area		GLA Leased on
State	Properties			(Sq. feet)		December 31, 2003
California		1			38,015		100	%
Florida		4	(1)		258,793		68
Indiana		1			15,844		100
Illinois		1			20,000		100
Kansas		2			45,000		100
Kentucky		1			135,009		100
Maryland		2			53,000		100
Michigan		26	(1)		2,106,032		99
Nebraska		2			55,000		100
Ohio		2			108,543		100
Oklahoma		4			99,282		100
Pennsylvania		1			37,004		100
Wisconsin		3			523,036		99
Total/Average		50			3,494,558		97	%

(1) Includes two (2) joint venture properties in which we own interests of 11% and 12% respectively.

Lease Expirations

     The following table shows lease expirations for the next 10 years for our freestanding properties and community shopping centers, assuming that none of the tenants exercise renewal options.

			December 31, 2003
			Gross Leasable Area					Annualized Base Rent
	Number
Expiration	of Leases		Square		Percent					Percent
Year	Expiring		Footage		of Total			Amount		of Total
2004		12		40,259		1.15	%	$	194,904		.76	%
2005		21		155,367		4.45			888,599		3.47
2006		35		167,724		4.80			1,386,099		5.41
2007		12		63,330		1.81			431,097		1.68
2008		23		383,138		10.96			1,441,445		5.62
2009		6		152,390		4.36			621,281		2.42
2010		7		213,135		6.10			1,243,929		4.85
2011		6		178,903		5.12			1,116,688		4.36
2012		—		—		—			—		—
2013		1		51,868		1.49			492,746		1.92
Total		123		1,406,114		40.24	%	$	7,816,788		30.49	%

(1) For purposes of this table we have assumed that Borders will enter into a 15 to 20 year lease upon the expiration of each of its leases on our two joint venture properties

     We have made preliminary contact with the tenants whose leases expire in 2004. Six (6) tenants, at their option have the right to extend their lease term; four (4) tenants’ leases expire in 2004 and we expect to negotiate lease extensions; one (1) tenant has a month to month lease arrangement; and one (1) tenant has elected to terminate its lease. Of the 19 leases that expired in 2003, sixteen (16) tenants extended their lease term; one (1) tenant elected not to extend their lease; and two tenants elected a month to month option.

     Leases on the two Joint Venture Properties are for an initial term through June 20, 2004. At the time that a refinancing of these properties is consummated, Borders is required to enter into a net lease at a fixed lease rate for a term of 15 to 20 years.

Annualized Base Rent of our Properties

     The following is a breakdown of base rents in place at December 31, 2003 for each type of retail tenant:

				Percent of
		Annualized		Annualized
Type of Tenant		Base Rent (1)		Base Rent
National (2)		$	22,605,413		88	%
Regional (3)			1,985,713		8
Local			1,043,309		4
	Total	$	25,634,435		100	%

(1)  Includes our share of annualized base rent for each of the joint venture properties.

(2)  Includes the following national tenants: Borders, Walgreen, Kmart, Wal-Mart, Fashion Bug, Winn Dixie, Rite Aid, JC Penney, Avco Financial, GNC Group, Radio Shack, Sam Goody, Super Value, Maurices, Payless Shoes, Blockbuster Video, Family Dollar, H&R Block, Sally Beauty, Jo Ann Fabrics, Staples, Best Buy, Dollar Tree, TGI Friday’s, Circuit City and Pier 1 Imports.

(3)  Includes the following regional tenants: Roundy’s Foods, Dunham’s Sports, Christopher Banks and Hollywood Video.

Freestanding Properties

     Thirty-seven (37) of our Properties are freestanding properties which at December 31, 2003 were leased to Borders (18), Circuit City Stores (1), Citizens Bank (1), Kmart (3), Rite Aid (1), Walgreen (12) and Wal-Mart (1). Our freestanding properties provided $15,423,693, or approximately 60% of our total annualized base rent as of December 31, 2003, at an average base rent per square foot of $11.85. These properties contain, in the aggregate, 1,301,753 square feet of gross leasable area or approximately 37% of our total gross leasable area. Our freestanding properties tend to have high traffic counts, are generally located in densely populated areas and are leased to a single tenant on a long term basis. Thirty-one (31) of our 37 freestanding properties were developed by us. Five (5) of our 37 freestanding properties, although not developed by us, were acquired as part of our relationship with Borders. Our freestanding properties have a weighted average lease term of 14.9 years.

     Our freestanding properties range in size from 4,426 to 458,729 square feet of gross leasable area and are located in the following states: California (1), Florida (3), Indiana (1), Kansas (2), Maryland (2), Michigan (19), Nebraska (2), Ohio (2), Oklahoma (4) and Pennsylvania (1). Included in our freestanding properties are two joint venture properties in which the Company owns interests of 11% and 12% respectively. The location and general occupancy information with respect to our freestanding properties are set forth in the following table:

Freestanding Properties (1)

	Year
	Completed/				Lease expiration (3)
Tenant/Location	Expanded		Total GLA		(Option expiration)
Borders, (2) Aventura, FL		1996		30,000	Jan 31, 2016 (2036)
Borders, Columbus, OH		1996		21,000	Jan 23, 2016 (2036)
Borders, Monroeville, PA		1996		37,004	Nov 8, 2016 (2036)
Borders, Norman, OK		1996		24,641	Sep 20, 2016 (2036)
Borders, Omaha, NE		1995		30,000	Nov 3, 2015 (2035)

	Year
	Completed/					Lease expiration (3)
Tenant/Location	Expanded		Total GLA			(Option expiration)
Borders, Santa Barbara, CA		1995		38,015		Nov 17, 2015 (2035)
Borders, Wichita, KS		1995		25,000		Nov 10, 2015 (2035)
Borders, (2) Lawrence, KS		1997		20,000		Oct 16, 2022 (2042)
Borders, Tulsa, OK		1998		25,000		Sep 30, 2018 (2038)
Borders, Oklahoma City, OK		2002		24,641		Jan 31, 2018 (2038)
Borders, Omaha, NE		2002		25,000		Jan 31, 2018 (2038)
Borders, Indianapolis, IN		2002		15,844		Nov 17, 2017 (2037)
Borders, Columbia, MD		1999		28,000		Jan 31, 2018 (2038)
Borders, Germantown, MD		2000		25,000		Jan 31, 2018 (2038)
Borders, Ann Arbor, MI		1996/1998		458,729		Jan 29, 2023 (2043)
Borders, Tulsa, OK		1996		25,000		Sep 30, 2018 (2038)
Citizens Bank, Flint, MI		2003		4,426		July 14, 2023
Circuit City Stores Boynton Beach, FL		1996		32,459		Dec 15, 2016 (2036)
Kmart, Grayling, MI		1984		52,320		Sep 30, 2009 (2059)
Kmart, Oscoda, MI		1984/1990		90,470		Sep 30, 2009 (2059)
Kmart, Perrysburg, OH		1983/1997		87,543		Oct 31, 2008 (2058)
Rite Aid, Canton Twp, MI		2003		11,180		Oct 31, 2019 (2049)
Sam’s Club, Roseville, MI		2002		(4	)	Aug 4, 2022 (2082)
Walgreen, Waterford, MI		1997		13,905		Feb 28, 2018 (2058)
Walgreen, Chesterfield, MI		1998		13,686		July 31, 2018 (2058)
Walgreen, Pontiac, MI		1998		13,905		Oct 31, 2018 (2058)
Walgreen, Grand Blanc, MI		1998		13,905		Feb 28, 2019 (2059

Freestanding Properties
(continued)

		Year				Lease expiration (3)
Tenant/Location		Completed		Total GLA		(Option expiration)
Walgreen, Rochester, MI			1998		13,905	June 30, 2019 (2059)
Walgreen, Ypsilanti, MI			1999		15,120	Dec 31, 2019 (2059)
Walgreen (2), Petoskey, MI			2000		13,905	Apr 30, 2020 (2060)
Walgreen, Flint, MI			2000		14,490	Dec 31, 2020 (2060)
Walgreen, Flint, MI			2001		15,120	Feb 28, 2021 (2061)
Walgreen, N Baltimore, MI			2001		14,490	Aug 31, 2021 (2061)
Walgreen, Flint, MI			2002		14,490	Apr 30, 2027 (2077)
Walgreen, Big Rapids, MI			2002		13,560	Apr 30, 2028 (2078)
	Total				788,858

(1)  Does not include the two joint venture properties

(2)  These properties are subject to long-term ground leases where a third party owns the underlying land and has leased the land to

us to construct or operate freestanding properties. We pay rent for the use of the land and we are generally responsible for all costs and expenses associated with the building and improvements. At the end of the lease terms, as extended (Aventura, FL 2036, Lawrence, KS 2027 and Petoskey, MI 2049), the land together with all improvements revert to the land owner. We have an option to purchase the Lawrence property during the period October 1, 2006 to September 30, 2016 and to purchase the Petoskey property after August 7, 2019.

(3)  At the expiration of a tenant’s initial lease term, each tenant has an option, subject to certain requirements, to extend its lease for an additional period of time.

(4)  This 12.68 acre property is leased from us by Wal-Mart pursuant to a ground lease.

Joint Venture Properties

     During 1996, seven free-standing properties which we leased to Borders, including Borders’ current corporate headquarters, its former headquarters building and properties operated as Borders Books and Music were developed or acquired directly by seven limited liability companies which we identify as joint ventures, but which are accounted for by us as partnerships. We have acquired the entire interest of our joint venture partner in five of the joint venture properties and have entered into a long-term lease with Borders for each property. The acquired properties are located in Oklahoma City, Oklahoma, Omaha, Nebraska, Indianapolis, Indiana, Ann Arbor, Michigan and Tulsa Oklahoma. The remaining two properties are owned by separate limited liability companies that are each owned jointly by us and an affiliate of Borders. Our economic interest in the joint ventures are 11% and 12% respectively. The financing for the development of the joint venture properties was provided through a financing facility established by Borders and its affiliates (Borders Financing Facility).

     The leases on the two properties between Borders and each of the joint ventures has a term expiring June 20, 2004, unless the Borders Financing Facility is extended or earlier terminated. At any time during the term of the lease, Borders has the right to cause the refinancing of the properties, provided that, prior to any refinancing, we may elect to provide alternative financing for the properties. If we elect to provide alternative financing and are subsequently unable to obtain the requisite financing, Borders may purchase the properties. Upon a refinancing by Borders or our providing alternative financing, we will acquire the interest of the Borders’ affiliate in the joint ventures, and Borders will enter into a new lease with us providing for a term of 15 or 20 years, with four five-year extension options.

     Our investment in the two joint venture properties currently yields approximately $388,000 annualized base rent. Under certain circumstances relating to refinancing of such assets, the rents paid pursuant to such leases are subject to adjustment. The following table provides additional information on the joint venture properties.

Joint Venture Properties

		The Company's
Tenant / Location		Interest			Total GLA		Lease Expirations
Borders, Inc. Ann Arbor, MI			11	%		110,000	June 20, 2004
Borders, Inc. Boynton Beach, FL			12	%		25,000	June 20, 2004
	Total					135,000

Community Shopping Centers

Thirteen (13) of our properties are community shopping centers ranging in size from 20,000 to 241,458 square feet of gross leasable area. The centers are located in 5 states as follows: Florida (1), Illinois (1), Kentucky (1), Michigan (7), and Wisconsin (3). The location, general character and occupancy information with respect to the community shopping centers at December 31, 2003 are set forth below: The option to extend the lease beyond its initial term is only at the option of the tenant.

Summary of Community Shopping Centers at December 31, 2003

										(2)		(3)
				(4)		Gross		(1)		Average		Percent			Percent
		Year		Land		Leasable		Annualized		Base		Leased at			Occupied			Anchor Tenants
		Completed/		Area		Area		Base		Rent per		Dec 31,			at Dec 31,			(Lease expiration/
Property Location		Expanded		(acres)		(Sq. Ft.)		Rent		Sq. Ft.		2003			2003			Option period expiration)
Capital Plaza			1978/		11.58		135,009	$	369,568	$	2.66		100	%		75	%	Kmart (2008/2053)
	Frankfort, KY		1991															Winn Dixie (2010/2035)
																		Fashion Bug (2005/2025)
Charleviox Commons			1991		14.79		137,375		637,245		4.81		96	%		70	%	Kmart (2015/2065)
	Charlevoix, MI																	Roundy’s (2011/2031)
Chippewa Commons			1991		16.37		168,311		925,383		5.52		100	%		100	%	Kmart (2014/2064)
	Chippewa Falls, WI																	Roundy’s (2011/2031)
																		Fashion Bug (2006/2021)
Iron Mountain Plaza			1991		21.20		176,352		868,418		5.06		97	%		97	%	Kmart (2015/2065)
	Iron Mountain, MI																	Roundy’s (2011/2031)
																		Fashion Bug (2007/2022)
Ironwood Commons			1991		23.92		185,535		905,910		5.00		98	%		98	%	Kmart (2015/2065)
	Ironwood, MI																	Super Value (2011/2036)
																		Fashion Bug (2004/2022)
Marshall Plaza			1990		10.74		119,279		648,831		5.44		100	%		100	%	Kmart (2015/2065)
	Marshall, MI

Summary of Community Shopping Centers at December 31, 2003 - (continued)

												(2)		(3)
						(4)		Gross		(1)		Average		Percent			Percent
				Year		Land		Leasable		Annualized		Base		Leased at			Occupied			Anchor Tenants
				Completed/		Area		Area		Base		Rent per		Dec 31,			at Dec 31,			(Lease expiration/
Property Location				Expanded		(acres)		(Sq. Ft.)		Rent		Sq. Ft.		2003			2003			Option period expiration)
Mt Pleasant Shopping					1973/		24.51		241,458	$	1,090,796	$	4.52		100	%		100	%	Kmart (2008/2048)
	Center				1997															J.C. Penney Co. (2005/2020)
		Mt. Pleasant, MI																		Staples, Inc. (2005/2025)
																				Fashion Bug (2006/2026)
North Lakeland Plaza					1987		16.67		171,334		725,368		8.31		51	%		51	%	Best Buy (2013/2028)
	Lakeland, FL
Petoskey Town Center					1990		22.08		174,870		1,022,776		5.98		98	%		98	%	Kmart (2015/2065)
	Petoskey, MI																			Roundy’s (2010/2030)
																				Fashion Bug (2007/2022)
Plymouth Commons					1990		16.30		162,031		963,766		5.97		100	%		100	%	Kmart (2015/2065)
	Plymouth, WI																			Roundy’s (2010/2030)
																				Fashion Bug (2004/2021)
Rapids Associates					1990		16.84		173,557		981,722		5.66		100	%		100	%	Kmart (2015/2065)
	Big Rapids, MI																			Roundy’s (2010/2030)
																				Fashion Bug (2004/2021)
Shawano Plaza					1990		17.91		192,694		969,959		5.03		100	%		100	%	Kmart (2014/2064)
	Shawano, WI																			Roundy’s (2010/2030)
																				J.C. Penney Co. (2005/2025)
																				Fashion Bug (2004/2021)
West Frankfort Plaza					1982		1.45		20,000		131,000		6.55		100	%		100	%	Fashion Bug (2007)
	West Frankfort, IL
			Total/Average				214.36		2,057,805	$	10,240,742	$	5.24		97	%		89	%

(1)	Our total annualized base rents as of December 31, 2003
(2)	Calculated as total annualized base rents, divided by gross leasable area actually leased as of December 31, 2003
(3)	Roundy’s has sub-leased the space it leases at Iron Mountain Plaza (35,285 square feet, rented at a rate of $5.87 per square foot) and leases but does not occupy the 35,896 square feet it leases at Charlevoix Commons at a rate of $5.97 per square foot and leases but does not occupy the 44,478 square feet it leases at Rapids Associates at a rate of $6.00 per square foot. The Rapids Associates lease expires in 2010 and the Charlevoix and Iron Mountain leases expire in 2011 (assuming they are not extended by Roundy’s). Winn Dixie leases but does not currently occupy, the 33,617 square feet it leases at Capital Plaza. This lease expires in 2010 and is rented at a rate of $4.06 per square foot.
(4)	All community shopping centers except Capital Plaza (which is subject to a long-term ground lease expiring in 2053 from a third party) are wholly-owned by Agree Limited Partnership.

Item 3. LEGAL PROCEEDINGS

     We are not presently involved in any litigation nor, to our knowledge, is any litigation threatened against us, except for routine litigation arising in the ordinary course of business which is expected to be covered by our liability insurance.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of security holders during the fourth quarter of 2003.

Part II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock is traded on the New York Stock Exchange under the symbol “ADC”. The following table sets forth the high and low sales prices of our common stock, as reported on the New York Stock Exchange Composite Tape, and the dividends declared per share of Common Stock by us for each calendar quarter in the last two fiscal years. Dividends were paid in the periods immediately subsequent to the periods in which such dividends were declared.

Market Information

						Dividends Per
		High		Low		Common Share
Quarter Ended
	March 31, 2003	$	20.44	$	17.00	$	0.480
	June 30, 2003	$	25.62	$	19.35	$	0.485
	September 30, 2003	$	24.98	$	22.68	$	0.485
	December 31, 2003	$	28.50	$	24.41	$	0.485
	March 31, 2002	$	18.97	$	14.40	$	0.46
	June 30, 2002	$	20.00	$	17.41	$	0.46
	September 30, 2002	$	19.98	$	15.75	$	0.46
	December 31, 2002	$	18.14	$	16.20	$	0.46

     At December 31, 2003, there were 6,434,345 shares of our common stock issued and outstanding which were held by approximately 220 stockholders of record. The stockholders of record do not reflect persons or entities who held their shares in nominee or “street” name.

     We intend to continue to declare quarterly dividends to our shareholders. However, our distributions are determined by our board of directors and will depend on a number of factors, including the amount of our funds from operations, the financial and other condition of our properties, our capital requirements, our annual distribution requirements under the provisions of the Code applicable to REITs and such other factors as our board of directors deems relevant.

     During the year ended December 31, 2003, we did not sell any unregistered securities, except the grant, under our 1994 Stock Incentive Plan (the Plan), of 36,814 shares of restricted stock to certain of our employees. The transfer restrictions on such shares lapse in equal annual installments over a five-year period from the date of the grant, but the holder thereof is entitled to receive dividends on all such shares from the date of the grant. On January 1, 2003 the Company redeemed 6,000 shares of restricted stock previously issued under the Plan.

Item 6. SELECTED FINANCIAL DATA

     The following table sets forth selected financial information for the Company on a historical basis and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and all of the financial statements and notes thereto included elsewhere in this Form 10-K. Certain amounts have been reclassified to conform to the current presentation of discontinued operations. The balance sheet for the periods ended December 31, 1999 through December 31, 2003 and operating data for each of the period presented were derived from the audited financial statements of the Company.

			(In thousands, except per share information)
			Year			Year		Year		Year		Year
			Ended			Ended		Ended		Ended		Ended
			Dec 31,			Dec 31,		Dec 31,		Dec 31,		Dec 31,
			2003			2002		2001		2000		1999
Total Revenue			$	27,472		$	24,409	$	23,451	$	22,555	$	20,696
Expenses
	Property expense (1)			4,464			4,043		3,645		3,579		3,311
	General and administrative			2,275			2,012		1,757		1,557		1,425
	Interest			5,684			6,196		6,720		7,045		5,771
	Depreciation and amortization			4,082			3,712		3,623		3,472		3,221
Total Expenses				16,505			15,963		15,745		15,653		13,728
Operating Income				10,967			8,446		7,706		6,902		6,968
Early extinguishment of debt				(961	)		—		—		—		—
Other Income (2)				438			673		913		522		69
Income before Minority Interest and discontinued operations				10,444			9,119		8,619		7,424		7,037
Minority Interest				1,183			1,199		1,140		987		941
Income before Discontinued Operations				9,261			7,920		7,479		6,437		6,096
Gain on sale of asset from discontinued operations				740			—		—		—		—
Income from discontinued operations				471			852		587		661		710
Net Income			$	10,472		$	8,772	$	8,066	$	7,098	$	6,806
Earnings per Share (3)
	Income before discontinued operations		$	1.79		$	1.80	$	1.71	$	1.46	$	1.40
	Discontinued operations			0.20			0.17		0.12		0.15		0.16
		Earnings per share	$	1.99		$	1.97	$	1.83	$	1.61	$	1.56
Cash dividends			$	1.935		$	1.840	$	1.840	$	1.840	$	1.840
Weighted average of common shares outstanding				5,273			4,447		4,417		4,396		4,365
Balance Sheet Data
Real Estate (before accumulated depreciation)			$	221,225		$	210,986	$	196,486	$	191,048	$	179,858
Total Assets			$	191,686		$	178,162	$	167,511	$	166,052	$	158,196
Total debt, including accrued interest			$	84,203		$	115,534	$	105,946	$	104,407	$	95,762
Number of Properties				50			48		47		45		42
Square Footage				3,495			3,699		3,556		3,526		3,468

(1)	Property expense includes real estate taxes, property maintenance, insurance, utilities and land lease expense.
(2)	Other income is composed of development fee income, gain on land sales, and equity in net income of unconsolidated entities.
(3)	Net income per share has been computed by dividing the net income by the weighted average number of shares of Common Stock outstanding. The per share amounts shown are presented in accordance with SFAS No. 128 “Earnings per Share”. The Company’s basic and diluted earnings per share are the same

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     We were established to continue to operate and expand the retail property business of our predecessor. We commenced our operations in April 1994. Our assets are held by, and all operations are conducted through, Agree Limited Partnership (the Operating Partnership), of which Agree Realty Corporation is the sole general partner and held a 90.52% interest as of December 31, 2003. We are operating so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes.

     On August 4, 2003, we completed an offering of 1,700,000 shares of common stock at $23.50 per share; on August 12, 2003 the underwriters exercised their over allotment option for an additional 255,000 shares at the same per share price (collectively, the “2003 Offering”). The net proceeds from the 2003 Offering of approximately $43.2 million were used to repay amounts outstanding under our credit facility.

     We have fourteen (14) leases with Kmart Corporation. Eleven (11) of the Kmart stores are currently anchors in our community shopping centers and three (3) Kmart stores are freestanding net leased properties. The Kmart stores in our portfolio provided 17% of our annual base rent as of December 31, 2003. Four of the Kmart stores paid percentage rent in addition to their minimum rent during 2003. As of December 31, 2003, all of our Kmart stores were open and operating as Kmart discount stores.

     In May 2003 Kmart emerged from the bankruptcy proceeding which it had initiated in January 2002. Pursuant to the confirmed plan of reorganization, Kmart closed approximately 600 of its stores, including one located in our center in Lakeland, Florida. Kmart vacated the premises in Lakeland, Florida in April 2003, and we are actively

marketing the space formerly occupied by Kmart. Kmart’s annual rent on this property was approximately $480,000 and their annual contribution under the lease for real estate taxes, insurance and common area maintenance was approximately $110,000. Certain tenants in the Lakeland, Florida community shopping center have co-tenancy clauses in their leases which provide either for modification of their rent to be based on gross sales or an option to terminate their lease when the Kmart store closed, and we are unable to obtain a replacement anchor tenant. As of February 29, 2004, none of these tenants has indicated that they will exercise their option to terminate their leases with us. We believe it will take between 12 and 18 months to re-let the Kmart location. In connection with the re-letting the Kmart location, we may have to agree to make capital expenditures with respect to the property. In addition, we have agreed to a rent reduction of $150,000 per year under a Kmart lease for a store in Perrysburg, Ohio. The rent reduction is for a 5-year period.

     During 2003 we sold a community shopping center that was located in Winter Garden, Florida and was anchored by Kmart. The Company developed the 233,512 square foot shopping center in 1988. The property was sold to a private investor for approximately $8.5 million. We recognized a gain of approximately $835,000 on the sale.

     The following should be read in conjunction with the Consolidated Financial Statements of Agree Realty Corporation, including the respective notes thereto, which are included elsewhere in this Form 10-K.

Recent Accounting Pronouncements

     In May 2003, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”). The objective of SFAS 150 is to establish standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. In November 2003, the FASB indefinitely delayed the effective date for certain mandatory redeemable non-controlling interests in consolidated financial statements. Adoption of SFAS 150 did not have an impact on the results of operations or financial position of the Company.

Critical Accounting Policies

     In the course of developing and evaluating accounting policies and procedures, we use estimates, assumptions and judgments to determine the most appropriate methods to be applied. Such processes are used in determining capitalization of costs related to real estate investments, potential impairment of real estate investments, operating cost reimbursements, and taxable income.

     Real estate assets are stated at cost less accumulated depreciation. All costs related to planning, development and construction of buildings prior to the date they become operational, including interest and real estate taxes during the construction period, are capitalized for financial reporting purposes and recorded as property under development until construction has been completed. Subsequent to completion of construction, expenditures for property maintenance are charged to operations as incurred, while significant renovations are capitalized. Depreciation of the buildings is recorded on the straight-line method using an estimated useful life of forty years.

     In determining the fair value of real estate investments, we consider future cash flow projections on a property by property basis, current interest rates and current market conditions of the geographical location of each property.

     Substantially all of our leases contain provisions requiring tenants to pay as additional rent a proportionate share of operating expenses (Operating Cost Reimbursements) such as real estate taxes, repairs and maintenance, insurance, etc. The related revenue from tenant billings is recognized in the same period the expense is recorded.

     We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our 1994 tax year. As a result, we are not subject to federal income taxes to the extent that we distribute annually at lease 90% of our taxable income to our shareholders and satisfy certain other requirements defined in the Code. Accordingly, no provision was made for federal income taxes in the accompanying consolidated financial statements.

Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002

     Minimum rental income increased $2,739,000, or 13%, to $24,333,000 in 2003, compared to $21,594,000 in 2002. The increase was the result of rental increases of $373,000 from existing properties; an increase of $1,953,000 due to additional rent resulting from the acquisition of our joint venture partner’s interest in three joint venture properties in 2002 and two joint venture properties in 2003; an increase of $387,000 from the development of one property in 2002 and two properties in 2003; and an increase of $26,000 from the acquisition of one property in 2003.

     Percentage rental income decreased $62,000, or 25%, to $186,000 in 2003, compared to $248,000 in 2002. The decrease was the result of a decrease in percentage rent received from Kmart of $56,000; and a decrease in percentage rent received from other tenants of $6,000.

     Operating cost reimbursements increased $393,000, or 15%, to $2,951,000 in 2003, compared to $2,558,000 in 2002. Operating cost reimbursement increased due to the increase in the reimbursable property operating expenses as explained below.

     Other income remained relatively constant at $3,000 in 2003, compared to $9,000 in 2002

     Real estate taxes increased $85,000, or 5%, to $1,779,000 in 2003 compared to $1,694,000 in 2002. The increase is the result of general assessment increases of $38,000 and additional real estate taxes of $47,000 which we are now required to pay as a result of the closing of the Kmart store in Lakeland, Florida.

     Property operating expenses (shopping center maintenance, snow removal, insurance and utilities) increased $340,000, or 21%, to $1,949,000 in 2003 compared to $1,609,000 in 2002. The increase was the result of additional shopping center maintenance of $63,000; increased snow removal costs of $36,000; an increase in utility costs of $22,000; and an increase in insurance costs of $219,000 in 2003 versus 2002.

     Land lease payments remained relatively constant at $737,000 for 2003 and $739,000 in 2002.

     General and administrative expenses increased $263,000, or 13%, to $2,275,000 in 2003 compared to $2,012,000 in 2002. The increase was the result of increased compensation related expenses of $179,000; increased general state taxes of $50,000; and increased property management related expenses of $34,000. General and administrative expenses as a percentage of rental income increased from 9.2% for 2002 to 9.3% for 2003.

     Depreciation and amortization increased $370,000, or 10%, to $4,082,000 in 2003 compared to $3,712,000 in 2002. The increase was the result of the development of one property in 2002 and two properties in 2003; the acquisition of one property in 2003; and the acquisition of the joint venture partner’s interest in three joint venture properties in 2002 and two joint venture properties in 2003.

     Interest expense decreased $512,000, or 8%, to $5,684,000 in 2003, from $6,196,000 in 2002. The decrease in interest expense was the result of decreased borrowings as a result of the reduction in outstanding indebtedness with the net proceeds from the issuance of additional common stock.

     Equity in net income of unconsolidated entities decreased $235,000, or 35%, to $438,000 in 2003 compared to $674,000 in 2002 as a result of the acquisition of our joint venture partner’s interest in three joint venture properties in 2002 and two joint venture properties in 2003.

     Early extinguishment of debt totaled $961,000 in 2003, as a result of the Company repaying in 2003 three mortgages totaling approximately $37,000,000 prior to their scheduled maturity. In connection with these repayments we incurred pre-payment penalties of $555,000 and wrote-off unamortized mortgage costs in the amount of $406,000.

     The Company recognized a gain on the sale of the Winter Garden Plaza community shopping center of $740,000 (net of minority interest) in 2003. There was no such gain in 2002.

     The Company’s income before minority interest and discontinued operations increased $2,159,000, or 24%, to $11,279,000 in 2003, from $9,120,000 in 2002 as a result of the foregoing factors.

Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001

     Minimum rental income increased $932,000, or 5%, to $21,594,000 in 2002, compared to $20,662,000 in 2001. The increase resulted from rental increases of $8,000 from existing properties; an increase of $147,000 due to additional rent resulting from the acquisition of our joint venture partner’s interest in three joint venture properties in 2002; an increase of $508,000 from the development of two properties in 2001 and one property in 2002; and three lease terminations payments received in 2002 of $269,000.

     Percentage rents decreased $165,000, or 40%, to $248,000 in 2002, compared to $413,000 in 2001. The decrease was the result of the elimination of a tenant’s percentage rent provision in exchange for an increase in their base rental income ($128,000); a decrease in

percentage rent received from Kmart ($73,000); and an increase in percentage rent received from other tenants $36,000.

     Operating cost reimbursements increased $223,000, or 10%, to $2,558,000 in 2002, compared to $2,335,000 in 2001. Operating cost reimbursement increased due to the increase in the reimbursable property operating expenses as explained below.

     Other income decreased $32,000, or 77%, to $9,000 in 2002, compared to $41,000 in 2001. The decrease was the result of the terminations in September 2001 and February 2002 of the management agreements between the Company and two properties it previously managed but did not own.

     Real estate taxes increased $56,000, or 3%, to $1,694,000 in 2002 compared to $1,638,000 in 2001. The increase is the result of general assessment increases on the properties.

     Property operating expenses (shopping center maintenance, snow removal, insurance and utilities) increased $341,000, or 27%, to $1,609,000 in 2002 compared to $1,268,000 in 2001. The increase was the result of additional shopping center maintenance of $120,000; increased snow removal costs of $134,000; an increase in utility costs of $1,000; and an increase in insurance costs of $86,000 in 2002 versus 2001.

     Land lease payments remained constant at $739,000 for 2002 and 2001.

     General and administrative expenses increased $255,000, or 15%, to $2,012,000 in 2002 compared to $1,757,000 in 2001. The increase was primarily the result of an increase in compensation related expenses related to the addition of an employee and normal compensation increases. General and administrative expenses as a percentage of rental income increased from 7.9% for 2001 to 8.7% for 2002.

     Depreciation and amortization increased $89,000, or 2%, to $3,712,000 in 2002 compared to $3,623,000 in 2001. The increase was the result of indebtedness incurred to develop three properties in 2001 and 2002 and to acquire the joint venture partner’s interest in three joint venture properties in 2002.

     Interest expense decreased $524,000, or 8%, to $6,196,000 in 2002, from $6,720,000 in 2001. The decrease in interest expense was the result of decreased interest rates on variable rate notes payable.

     Equity in net income of unconsolidated entities decreased $21,000 to $674,000 in 2002 compared to $694,000 in 2001 as a result of the acquisition of the joint venture partner’s interest in three joint venture properties in November 2002.

     The Company recognized a gain on the sale of an asset in the amount of $219,000 in 2001. There was no such gain in 2002.

     The Company’s income before minority interest and discontinued interest increased $501,000, or 6%, to $9,120,000 in 2002, from $8,619,000 in 2001 as a result of the foregoing factors.

Funds from Operations

     We consider Funds from Operations (“FFO”) to be a useful supplemental measure to evaluate our operating performance. We also

consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO can help one compare the operating performance of our real estate between periods or compare such performance to that of different companies. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (NAREIT) to mean net income computed in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization. FFO should not be considered as an alternative to net income as the primary indicator of our operating performance or as an alternative to cash flow as a measure of liquidity. While we adhere to the NAREIT definition of FFO in making our calculation, our method of calculating FFO may not be comparable to the methods used by other REITs and accordingly may be different from similarly titled measures reported by other companies.

     The following table illustrates the calculation of FFO for the years ended December 31, 2003, 2002 and 2001:

	Year ended December 31,
	2003			2002		2001
Net income	$	10,471,746		$	8,772,330	$	8,065,653
Depreciation of real estate assets		4,164,691			3,840,636		3,747,065
Amortization of leasing costs		55,182			68,325		68,241
Minority interest		1,338,046			1,328,233		1,229,819
Gain on sale of assets		(834,669	)		—		(218,543	)
Funds from Operations	$	15,194,996		$	14,009,524	$	12,892,235
Weighted average shares and OP Units outstanding		5,946,070			5,120,338		5,090,416

Liquidity and Capital Resources

     Our principal demands for liquidity are distributions to our shareholders, debt service, development of new properties and future property acquisitions.

     During the quarter ended December 31, 2003, we declared a quarterly dividend of $.485 per share. The dividend was paid on January 6, 2004 to holders of record on December 22, 2003.

     As of December 31, 2003, we had total mortgage indebtedness of $55,967,378 with a weighted average interest rate of 6.63%. Future scheduled annual maturities of mortgages payable for the years ending December 31 are as follows: 2004 — $2,049,975; 2005 — $2,298,292; 2006 — $2,454,764; 2007 - $2,621,920; 2008 — $2,781,076. The mortgage debt is all fixed rate, self-amortizing debt.

     In addition, the Operating Partnership has in place a $50 million credit facility with Standard Federal Bank, as the agent (Credit Facility), which is guaranteed by the Company. The Credit Facility matures in November 2006 and can be extended for an additional three years. During the three year extension period we will have no further ability to borrow under this facility and will be required to repay a portion of the unpaid principal on a quarterly basis. Advances under

the Credit Facility bear interest within a range of one-month to six-month LIBOR plus 150 basis points to 213 basis points or the lender’s prime rate, at the our option, based on certain factors such as debt to property value and debt service coverage. The Credit Facility is used to fund property acquisitions and development activities and is secured by most of the properties which are not otherwise encumbered and properties to be acquired or developed. As of December 31, 2003, $24,000,000 was outstanding under the Credit Facility bearing a weighted average interest rate of 2.74%.

     We also have in place a $5 million line of credit (Line of Credit), which matures on April 30, 2004, and which we expect to renew for an additional 12-month period. The Line of Credit bears interest at the lender’s prime rate less 50 basis points or 175 basis points in excess of the one-month LIBOR rate, at our option. The purpose of the Line of Credit is to provide working capital and fund land options and start-up costs associated with new projects. As of December 31, 2003, $2,500,000 was outstanding under the Line of Credit bearing a weighted average interest rate of 3.50%.

     We have received funding from an unaffiliated third party for the construction of one of our properties. Advances under this arrangement bear no interest. The advances are secured by the specific land and buildings being developed. As of December 31, 2003, $1,569,000 was outstanding under this arrangement.

     The following table outlines our contractual obligations (in thousands) as of December 31, 2003.

		Total		Yr 1		2-3 Yrs		4-5 Yrs		Over 5 Yrs
Mortgages Payable		$	55,967	$	2,050	$	4,753	$	5,403	$	43,761
Construction Loan			1,569		—		—		—		1,569
Notes Payable			26,500		2,500		—		—		24,000
Land Lease Obligations			15,072		725		1,533		1,535		11,279
Other Long-Term Liabilities			—		—		—		—		—
	Total	$	99,108	$	5,275	$	6,286	$	6,938	$	80,609

     During the third quarter 2003, we negotiated an early payment on three mortgage notes totaling approximately $37 million and bearing an interest rate of 7.00%. The mortgages were secured by eight (8) community shopping centers. Two of the mortgages totaling approximately $30.3 million were scheduled to mature in November, 2005 and required a final payment in the amount of approximately $28.2 million on the maturity date. The third mortgage in the amount of approximately $6.7 million had a scheduled maturity date of April 2013 and required a final payment in the amount of approximately $2.9 million on the maturity date. This mortgage contained a provision that would reset the interest rate to the then current rate in December 2005. We incurred a pre-payment penalty of 1.50% on the outstanding mortgage balance.

     We have one development project under construction that will add an additional 14,560 square feet of GLA to our portfolio. The project was completed during the first quarter of 2004. Additional funding required for this project is estimated to be $1,400,000 and will come from the Credit Facility.

     We intend to meet our short-term liquidity requirements, including capital expenditures related to the leasing and improvement of the properties, through cash flow provided by operations and the Line of

Credit. We also have restricted cash available to fund future real estate investments. We believe that adequate cash flow will be available to fund our operations and pay dividends in accordance with REIT requirements. We may obtain additional funds for future development or acquisitions through other borrowings or the issuance of additional shares of common stock. We intend to incur additional debt in a manner consistent with our policy of maintaining a ratio of total debt (including construction and acquisition financing) to total market capitalization of 65% or less. We believe that these financing sources will enable us to generate funds sufficient to meet both our short-term and long-term capital needs.

     We plan to begin construction of additional pre-leased developments and may acquire additional properties, which will initially be financed by the Credit Facility and Line of Credit. We will periodically refinance short-term construction and acquisition financing with long-term debt and / or equity. Upon completion of refinancing, we intend to lower the ratio of total debt to market capitalization to 50% or less. Nevertheless, we may operate with debt levels or rations, which are in excess of 50% for extended periods of time prior to such refinancing.

Inflation

     Our leases generally contain provisions designed to mitigate the adverse impact of inflation on net income. These provisions include clauses enabling us to pass through to our tenants certain operating costs, including real estate taxes, common area maintenance, utilities and insurance, thereby reducing our exposure to cost increases and operating expenses resulting from inflation. Certain of our leases contain clauses enabling us to receive percentage rents based on tenants’ gross sales, which generally increase as prices rise, and, in certain cases, escalation clauses, which generally increase rental rates during the term of the leases. In addition, expiring tenant leases permit us to seek increased rents upon re-lease at market rates if rents are below the then existing market rates.

Item 7A QUANTITATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to interest rate risk primarily through our borrowing activities. There is inherent roll over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements.

     Our interest rate risk is monitored using a variety of techniques. The table below presents the principal payments (in thousands) and the weighted average interest rates on remaining debt, by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.

		2004		2005		2006		2007		2008		Thereafter		Total
Fixed rate debt			2,050		2,298		2,455		2,622		2,781		43,761		55,967
	Average interest rate		6.63		6.63		6.63		6.63		6.63		6.63		-
Construction loans			—		—		—		—		—		1,569		1,569
	Average interest rate		—		—		—		—		—		—		-
Variable rate debt			2,500		—		—		640		640		22,720		26,500
	Average interest rate		3.50		2.74		2.74		2.74		2.74		2.74		-

     The fair value (in thousands) is estimated at $56,500, $1,569 and $26,500 for fixed rate debt, construction loans and variable rate debt, respectively.

     The table above incorporates those exposures that exist as of December 31, 2003; it does not consider those exposures or position, which could arise after that date. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period and interest rates.

     The Company does not enter into financial instrument transactions for trading or other speculative purposes or to manage interest rate exposure.

     A 10% adverse change in interest rates on the portion of the Company’s debt bearing interest at variable rates would result in an increase in interest expense of approximately $75,000.

Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements and supplementary data are listed in the Index to Financial Statements and Financial Statement Schedules appearing on Page F-1 of this Form 10-K and are included in this Form 10-K following page F-1.

Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     During our last two fiscal years, there have been no changes in the independent accountants nor disagreements with such accountants as to accounting and financial disclosures of the type required to be disclosed in this Item 9.

Item 9A CONTROLS AND PROCEDURES

     Under the supervision and with the participation of our management, including our Principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to us, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in Sec rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 10, 2004.

Code of Ethics

     We have adopted a code of business and ethics for directors, officers, and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at www.agreerealty.com. Stockholders may request a free copy of The Code of Business Conduct and Ethics from:

Agree Realty Corporation
Attention: Kenneth R. Howe
31850 Northwestern Highway
Farmington Hills, MI 48334
(248) 737-4190
www.agreerealty.com

     We have also adopted a Chief Executive Officer and Chief Financial Officer Code of Professional Ethics setting forth a code of ethics applicable to our principal executive officer and principal financial officer, which is available on our website at www.agreerealty.com. Stockholders may request a free copy of the Chief Executive Officer and Chief Financial Officer Code of Professional Ethics from the address and phone number set forth above.

Corporate Governance Guidelines

     We have adopted Corporate Governance Guidelines, which are available on our website at www.agreerealty.com. Stockholders may request a free copy of the Corporate Governance Guidelines from the address and phone number set forth above under “-Code of Ethics.”

Item 11. EXECUTIVE COMPENSATION

     Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 10, 2004.

     The following table summarizes the equity compensation plans under which the Company’s common stock may be issued as of December 31, 2003.

	Number of securities to		Weighted average
	be issued upon exercise		exercise price of		Number of securities
	of outstanding options,		outstanding options,		remaining available
Plan category	warrants and rights		warrants and rights		for future issuance
Equity compensation plans approved by security holders		23,275	$	19.50		107,315
Equity compensation plans not approved by security holders		—		—		—
Total		23,275	$	19.50		107,315

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with

respect to its Annual Meeting of Stockholders to be held on May 10, 2004.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 10, 2004.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 10, 2004.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8-K

(a) The following documents are filed as part of this Report

(1) (2) The financial statements indicated by Part II, Item 8, Financial Statements and Supplementary Data.

(b) Reports on Form 8-K

On October 29, 2003, we filed a Form 8-K under Item 7 and Item 12 furnishing our third quarter 2003 results of operations and financial condition

(C) Exhibits

3.1	Articles of Incorporation and Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-11 (Registration Statement No. 33-73858, as amended (“Agree S-11”))
3.2	Bylaws of the Company (incorporated by reference to Exhibit 3.3 to Agree S-11)
4.1	Rights Agreement by and between Agree Realty Corporation and BankBoston, N.A. as Rights Agent Dated as of December 7, 1998 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on December 7, 1998)
10.1	Loan Modification Agreement, dated April 22, 1994, by and among Shawano Plaza, Plymouth Commons, Chippewa Commons and Nationwide Life Insurance Company (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996 (the “1996 Form 10-K”))
10.2	Loan Modification Agreement, dated April 22, 1994, by and among Rapids Associates, Marshall Plaza Phase Two, Petoskey Town Center, Charlevoix Commons and Nationwide Life Insurance Company (incorporated by reference to Exhibit 10.2 to the 1996 Form 10-K)

10.3	First Amended and Restated Agreement of Limited Partnership of Agree Limited Partnership, dated as of April 22, 1994, by and among the Company, Richard Agree, Edward Rosenberg and Joel Weiner (incorporated by reference to Exhibit 10.6 to the 1996 Form 10-K)
10.4	Amended and Restated Registration Rights Agreement, dated July 8, 1994 by and among the Company, Richard Agree, Edward Rosenberg and Joel Weiner (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1994)
10.5 +	1994 Stock Incentive Plan of the Company (incorporated by reference to Exhibit 10.8 to the 1996 Form 10-K)
10.6	Management Agreement, dated April 22, 1994, by and among Mt Pleasant Shopping Center, Angola Plaza, Shiloh Plaza and the Company (incorporated by reference to Exhibit 10.9 to the 1996 Form 10-K)
10.7	Contribution Agreement, dated as of April 21, 1994, by and among the Company, Richard Agree, Edward Rosenberg and the co-partnerships named therein (incorporated by reference to Exhibit 10.10 to the 1996 Form 10-K)
10.8 +	Agree Realty Corporation Profit Sharing Plan (incorporated by reference to Exhibit 10.13 to the 1996 Form 10-K)
10.9	Business Loan Agreement, dated as of September 21, 1995, by and between Agree Limited Partnership and Michigan National Bank (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995 (the “1995 Form 10-K”))
10.10	Line of Credit Agreement by and among Agree Limited Partnership, the Company, the lenders parties thereto, and Michigan National Bank as Agent (incorporated by reference to Exhibit 10.10 to the 1995 Form 10-K)
10.11	First amendment to $50 million line-of-credit agreement dated August 7, 1997 among Agree Realty Corporation and Michigan National Bank, as agent (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 1997 (the “September 1997 Form 10-Q”))
10.12	First amendment to $5 million business loan agreement dated September 21, 1997 between Agree Limited Partnership and Michigan National Bank (incorporated by reference to Exhibit 10.2 to the September 1997 Form 10-Q)
10.13	Second amendment to $50 million line-of-credit agreement dated November 17, 1997 among Agree Realty Corporation and Michigan National Bank, as agent (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997)
10.14	Second amendment to amended and restated $5 million business

	Loan agreement dated October 19, 1998 between Agree Limited Partnership and Michigan National Bank (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998)
10.15 +	Employment Agreement, dated July 1, 1999, by and between the Company, and Richard Agree (incorporated by reference to exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the period ending June 30, 1999 (the “June 1999 Form 10- Q))
10.16 +	Employment Agreement, dated July 1, 1999, by and between the Company, and Kenneth R. Howe (incorporated by reference to exhibit 10.6 to the June 1999 Form 10-Q)
10.17	Third amendment to amended and restated $5 million business Loan agreement dated December 19, 1999 between Agree Limited Partnership and Michigan National Bank (incorporated by reference to exhibit 10.17 to the 1999 Form 10-K)
10.18	Assumption Agreement, Mortgage Modification and Amended and Restated Mortgage and Security Agreement, dated as of March 31, 1999 by Agree Limited Partnership to and in favor of Nationwide Life Insurance Company (incorporated by reference to exhibit 10.1 to the June 1999 Form 10-Q)
10.19	Project Loan Agreement dated as of April 30, 1999 between Wilmington Trust Company not in its individual capacity, but solely as Owner Trustee and Agree – Columbia Crossing Project L.L.C. (incorporated by reference to exhibit 10.2 to the June 1999 Form 10-Q)
10.20	Project Loan Agreement dated as of June 11, 1999 between Wilmington Trust Company not in its individual capacity, but solely as Owner Trustee and Agree – Milestone Center Project L.L.C. (incorporated by reference to exhibit 10.3 to the June 1999 Form 10-Q)
10.21	Trust Mortgage dated as of June 27, 1999 from Agree Facility No. 1, L.L.C. as Grantor to Manufacturers and Traders Trust Company (incorporated by reference to exhibit 10.4 to the June 1999 Form 10-Q)
10.22 +	Employment Agreement, dated January 10, 2000, by and between the Company, and David J. Prueter (incorporated by reference to exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2000
10.23	Third amendment to $50 million line-of-credit agreement dated August 7, 2000 among Agree Realty Corporation and Michigan National Bank, as agent (incorporated by reference To exhibit 10.1 to the Company’s Quarterly report on Form 10-Q for the period ended September 30, 2000)
10.24	Fourth amendment to amended and restated $5 million business Loan agreement dated February 19, 2001 between Agree Limited Partnership and Michigan National Bank (incorporated by reference to exhibit 10.23 to the Company’s Annual Report on

	Form 10-K for the year ended December 31, 2000 (the “2000 Form 10-K”))
10.25	Mortgage dated as of December 20, 2001, by Agree Limited Partnership to and in favor of Nationwide Life Insurance Company (incorporated by reference to exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 (the “2001 from 10-K))
10.26	Fifth amendment to amended and restated $5 million business Loan agreement dated April 30, 2002 between Agree Limited Partnership and Standard Federal Bank (incorporated by reference to exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2002 (the “June 2002 Form 10-Q”))
10.27	Project Loan Agreement dated as of April 30, 2002 between Royal Identify Company (together with its successors and assigns) and Lawrence Store No. 203 L.L.C. (together with its permitted successors and assigns) (incorporated by reference to exhibit 10.2 to the June 2002 Form 10-Q)
10.28	Project Loan Agreement dated as of November 25, 2002 between Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee, and Indianapolis Store No. 16 L.L.C.
10.29	Project Loan Agreement dated as of January 30, 2003 between Modern Woodman of America and Phoenix Drive L.L.C. (incorporated by reference to exhibit 10.1 to the March 31, 2003 Form 10-Q)
10.30	Sixth amendment to amended and restated $5 million business loan agreement dated April 30, 2003, between Agree Limited Partnership and Standard Federal Bank (incorporated by reference to exhibit 10.1 to the June 30, 2003 Form 10-Q)
10.31	Fourth amendment to $50 million Line of Credit agreement dated July 11, 2003 among Agree Realty Corporation and Standard Federal Bank, N.A. (incorporated by reference to exhibit 10.2 to the June 30, 2003 Form 10-Q)
10.32	Amended and Restated $50 million Line of Credit agreement dated November 5, 2003, among Agree Realty Corporation, Standard Federal Bank and Bank One. (incorporated by reference to exhibit 10.1 to the Sep 30, 2003 Form 10-Q)
10.33 *	Indemnity Deed of Trust and Security Agreement dated October 31, 2003, by Agree – Columbia Crossing Project, L.L.C., and Nationwide Life Insurance Company
10.34 *	Indemnity Deed of Trust and Security Agreement dated October 31, 2003, by Agree-Milestone Center Project, L.L.C., and Nationwide Life Insurance Company
10.35 *	Mortgage and Security Agreement dated October 31, 2003, by Oklahoma Store No. 151, L.L.C. and Nationwide Life Insurance

	Company
10.36 *	Deed of Trust and Security Agreement dated October 31, 2003, by Omaha Store No. 166, L.L.C. and Nationwide Life Insurance Company
14.1 *	Chief Executive Officer and Chief Financial Officer Code of Professional Ethics.
21.1 *	Subsidiaries of Agree Realty Corporation
23 *	Consent of BDO Seidman, LLP
31.1 *	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Richard Agree, Chief Executive Officer
31.2 *	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Kenneth R. Howe, Chief Financial Officer
32.1 *	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Richard Agree, Chief Executive Officer
32.2 *	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Kenneth R. Howe, Chief Financial Officer

*	Filed herewith
+	Management contract or compensatory plan or arrangement

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.

AGREE REALTY CORPORATION
By:	/s/ Richard Agree
Name:	Richard Agree President and Chairman of the Board of Directors
Date:	March 12, 2004

     PURSUANT to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 12th day of March 2004.

By:	/s/Richard Agree Richard Agree President and Chairman of the Board of Directors (Principal Executive Officer)	By:	/s/ Farris G. Kalil Farris G. Kalil Director
		By:	/s/ Michael Rotchford Michael Rotchford Director
By:	/s/Kenneth R. Howe Kenneth R. Howe Vice President, Finance and Secretary (Principal Financial and Accounting Officer)	By:	/s/ Ellis G. Wachs Ellis G. Wachs Director
		By:	/s/ Gene Silverman Gene Silverman Director
		By:	/s/ Leon M. Schurgin Leon M. Schurgin Director

Agree Realty Corporation

Index

		Page
Report of Independent Certified Public Accountants			F-2
Financial Statements
	Consolidated Balance Sheets		F-3
	Consolidated Statements of Income		F-5
	Consolidated Statements of Stockholders’ Equity		F-6
	Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements			F-9
Schedule III - Real Estate and Accumulated Depreciation			F-25

F - 1

Report of Independent Certified Public Accountants

To the Board of Directors and Owners of
Agree Realty Corporation
Farmington Hills, Michigan

We have audited the accompanying consolidated balance sheets of Agree Realty Corporation (the “Company”) as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. We have also audited the schedule listed in the accompanying index. These financial statements and the schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and the schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and the schedule. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Agree Realty Corporation at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein.

BDO SEIDMAN, LLP

Troy, Michigan
February 13, 2004

F - 2

Agree Realty Corporation

Consolidated Balance Sheets

December 31,		2003			2002
Assets
Real Estate Investments (Notes 3, 4 and 5)
	Land	$	56,848,606		$	53,177,464
	Buildings		161,265,188			155,536,789
	Property under development		3,110,835			2,271,413
			221,224,629			210,985,666
	Less accumulated depreciation		(38,475,767	)		(37,456,301	)
Net Real Estate Investments			182,748,862			173,529,365
Cash and Cash Equivalents			1,004,090			1,095,610
Cash - Restricted			4,309,914			—
Accounts Receivable - Tenants, net of allowance of $120,000 and $185,000 for possible losses			622,337			784,637
Investments In and Advances To Unconsolidated Entities			330,316			315,496
Unamortized Deferred Expenses
	Financing costs		1,155,427			1,117,253
	Leasing costs		231,344			307,746
Other Assets			1,283,424			1,012,065
		$	191,685,714		$	178,162,172

See accompanying notes to consolidated financial statements.

F - 3

Agree Realty Corporation

Consolidated Balance Sheets

December 31,		2003			2002
Liabilities and Stockholders’ Equity
Mortgages Payable (Note 3)		$	55,967,378		$	71,588,863
Construction Loans (Note 4)			1,569,000			5,612,313
Notes Payable (Note 5)			26,500,000			38,083,232
Dividends and Distributions Payable (Note 6)			3,447,328			2,356,156
Accrued Interest Payable			167,099			249,706
Accounts Payable
	Capital expenditures		570,363			589,760
	Operating		1,408,272			1,179,273
Tenant Deposits			47,099			93,138
Total Liabilities			89,676,539			119,752,441
Minority Interest (Note 7)			5,821,739			5,787,007
Stockholders’ Equity (Note 6)
	Common stock, $.0001 par value; 20,000,000 shares authorized; 6,434,345 and 4,448,531 shares issued and outstanding		643			445
	Additional paid-in capital		108,251,813			64,506,772
	Deficit		(11,227,636	)		(11,135,499	)
			97,024,820			53,371,718
Less: unearned compensation – restricted stock (Note 10)			(837,384	)		(748,994	)
Total Stockholders’ Equity			96,187,436			52,622,724
		$	191,685,714		$	178,162,172

See accompanying notes to consolidated financial statements.

F - 4

Agree Realty Corporation

Consolidated Statements of Income

Year Ended December 31,		2003			2002			2001
Revenues
	Minimum rents	$	24,333,371		$	21,593,957		$	20,661,694
	Percentage rents		185,620			247,994			413,058
	Operating cost reimbursement		2,950,565			2,557,965			2,335,183
	Other income (Note 8)		2,885			9,250			40,573
Total Revenues			27,472,441			24,409,166			23,450,508
Operating Expenses
	Real estate taxes		1,778,517			1,694,031			1,638,271
	Property operating expenses		1,948,754			1,609,350			1,267,534
	Land lease payments		736,793			738,915			738,960
	General and administrative		2,275,177			2,011,854			1,756,709
	Depreciation and amortization		4,081,942			3,712,373			3,622,655
Total Operating Expenses			10,821,183			9,766,523			9,024,129
Income From Continuing Operations			16,651,258			14,642,643			14,426,379
Other Income (Expense)
	Interest expense, net		(5,684,200	)		(6,196,153	)		(6,720,318	)
	Early extinguishment of debt		(961,334	)		—			—
	Equity in net income of unconsolidated entities		438,489			673,580			694,319
	Gain on sale of assets		—			—			218,543
Total Other Expense			(6,207,045	)		(5,522,573	)		(5,807,456	)
Income Before Minority Interest and Discontinued Operations			10,444,213			9,120,070			8,618,923
Minority Interest			1,183,319			1,199,298			1,140,312
Income Before Discontinued Operations			9,260,894			7,920,772			7,478,611
Gain on Sale of Asset From Discontinued Operations, net of minority interest of $94,575			740,094			—			—
Income From Discontinued Operations, net of minority interest of $60,152, $128,935 and $89,507			470,758			851,558			587,042
Net Income		$	10,471,746		$	8,772,330		$	8,065,653
Basic and Diluted Earnings Per Share (Note 2)
	Income before discontinued operations	$	1.79		$	1.80		$	1.71
	Discontinued operations, net of minority interest		.20			.17			12
Earnings Per Share		$	1.99		$	1.97		$	1.83

See accompanying notes to consolidated financial statements.

F - 5

Agree Realty Corporation

Consolidated Statements of Stockholders’ Equity

	Common Stock					Additional						Unearned
						Paid-In						Compensation -
	Shares			Amount		Capital			Deficit			Restricted Stock
Balance, January 1, 2001		4,394,669		$	440	$	63,632,433		$	(11,663,446	)	$	(542,341	)
Issuance of shares under the Stock Incentive Plan		27,291			2		375,249			—			(305,250	)
Shares redeemed under the Stock Incentive Plan		(5,091	)		—		(70,000	)		—			—
Vesting of restricted stock		—			—		—			—			266,252
Dividends declared, $1.84 per share		—			—		—			(8,127,039	)		—
Net income		—			—		—			8,065,653			—
Balance, December 31, 2001		4,416,869			442		63,937,682			(11,724,832	)		(581,339	)
Issuance of shares under the Stock Incentive Plan		37,662			3		680,030			—			(482,900	)
Shares redeemed under the Stock Incentive Plan		(6,000	)		—		(110,940	)		—			—
Vesting of restricted stock		—			—		—			—			315,245
Dividends declared, $1.84 per share		—			—		—			(8,182,997	)		—
Net income		—			—		—			8,772,330			—
Balance, December 31, 2002		4,448,531			445		64,506,772			(11,135,499	)		(748,994	)
Issuance of common stock, net of issuance costs		1,955,000			195		43,224,291			—			—
Issuance of shares under the Stock Incentive Plan		36,814			3		622,150			—			(456,300	)
Shares redeemed under the Stock Incentive Plan		(6,000	)		—		(101,400	)		—			—
Vesting of restricted stock		—			—		—			—			367,910
Dividends declared, $1.94 per share		—			—		—			(10,563,883	)		—
Net income		—			—		—			10,471,746			—
Balance, December 31, 2003		6,434,345		$	643	$	108,251,813		$	(11,227,636	)	$	(837,384	)

See accompanying notes to consolidated financial statements.

F - 6

Agree Realty Corporation

Consolidated Statements of Cash Flows

Year Ended December 31,			2003			2002			2001
Cash Flows From Operating Activities
	Net income		$	10,471,746		$	8,772,330		$	8,065,653
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation		4,188,655			3,861,751			3,767,240
		Amortization		633,922			357,589			454,196
		Stock-based compensation		367,910			315,245			266,252
		Gain on sale of assets		(834,669	)		—			(218,543	)
		Equity in net income of unconsolidated entities		(438,489	)		(673,580	)		(694,319	)
		Minority interests		1,338,046			1,328,233			1,229,819
		Decrease (increase) in accounts receivable		162,300			(117,888	)		74,816
		(Increase) in other assets		(336,483	)		(191,958	)		(29,313	)
		Increase (decrease) in accounts payable		228,999			(65,677	)		227,457
		Increase (decrease) in accrued interest		(82,607	)		31,108			(96,009	)
		Increase (decrease) in tenant deposits		(46,039	)		43,118			(1,220	)
Net Cash Provided By Operating Activities				15,653,291			13,660,271			13,046,029
Cash Flows From Investing Activities
	Acquisition of real estate investments (including capitalized interest of $213,000 in 2003, $118,000 in 2002 and $165,800 in 2001)			(20,116,584	)		(13,910,078	)		(4,839,564	)
	Distributions from unconsolidated entities			438,489			673,580			694,319
	Net proceeds from sale of assets, less amounts held in escrow			3,887,338			—			280,000
Net Cash Used In Investing Activities				(15,790,757	)		(13,236,498	)		(3,865,245	)

See accompanying notes to consolidated financial statements.

F - 7

Agree Realty Corporation

Consolidated Statements of Cash Flows

Year Ended December 31,		2003			2002			2001
Cash Flows From Financing Activities
	Line-of-credit net borrowings (payments)		(11,583,232	)		18,125,000			(15,400,000	)
	Dividends and limited partners’ distributions paid		(10,776,024	)		(9,407,759	)		(9,356,153	)
	Payment on construction loans		(4,043,313	)		(7,766,219	)		(53,800	)
	Payments of mortgages payable		(38,320,636	)		(2,104,010	)		(1,910,433	)
	Mortgage proceeds		22,699,151			1,301,866			19,000,000
	Payments of payables for capital expenditures		(423,910	)		(401,229	)		(1,040,672	)
	Redemption of restricted stock		(101,400	)		(110,940	)		(70,000	)
	Payments for financing costs		(609,367	)		(43,103	)		(256,679	)
	Payments of leasing costs		(19,811	)		(23,630	)		(110,258	)
	Net proceeds from the issuance of common stock		43,224,488			—			—
Net Cash Provided By (Used In) Financing Activities			45,946			(430,024	)		(9,197,995	)
Net Decrease In Cash and Cash Equivalents			(91,520	)		(6,251	)		(17,211	)
Cash and Cash Equivalents, beginning of year			1,095,610			1,101,861			1,119,072
Cash and Cash Equivalents, end of year		$	1,004,090		$	1,095,610		$	1,101,861
Supplemental Disclosure of Cash Flow Information
	Cash paid for interest (net of amounts capitalized)	$	5,619,551		$	5,889,778		$	6,486,219
Supplemental Disclosure of Non-Cash Transactions
	Construction loan paid with mortgage	$	—		$	3,181,670		$	—
	Dividends and limited partners’ distributions declared and unpaid	$	3,447,328		$	2,356,156		$	2,341,591
	Shares issued under Stock Incentive Plan	$	622,153		$	680,033		$	375,251
	Real estate investments financed with accounts payable	$	570,363		$	589,760		$	598,362

See accompanying notes to consolidated financial statements.

F - 8

Agree Realty Corporation

Notes to Consolidated Financial Statements

1.     The Company

Agree Realty Corporation (the “Company”) is a self-administered, self-managed real estate investment trust, which develops, acquires, owns and operates properties, which are primarily leased to national and regional retail companies under net leases. At December 31, 2003, the Company’s properties are comprised of thirty-five single tenant retail facilities and thirteen shopping centers located in thirteen states. In addition, the Company owns joint venture interests of 11% and 12% respectively in two free-standing retail properties. During the year ended December 31, 2003, approximately 96% of the Company’s base rental revenues were received from national and regional tenants under long-term leases, including approximately 33% from Borders, Inc., 17% from Walgreen Co., and 17% from Kmart Corporation.

2.     Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of Agree Realty Corporation include the accounts of the Company, its majority-owned partnership, Agree Limited Partnership (the “Operating Partnership”), and its wholly-owned subsidiaries. The Company controlled, as the sole general partner, 90.52% and 86.85% of the Operating Partnership as of December 31, 2003 and 2002, respectively. All material intercompany accounts and transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of (1) assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from those estimates.

F - 9

Agree Realty Corporation

Notes to Consolidated Financial Statements

Fair Values of Financial Instruments

The carrying amounts of the Company’s financial instruments, which consist of cash, cash equivalents, receivables, notes payable, accounts payable and long-term debt, approximate their fair values.

Valuation of Long-Lived Assets

Long-lived assets such as real estate investments are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value. No impairment loss recognition has been required through December 31, 2003.

Real Estate Investments

Real estate assets are stated at cost less accumulated depreciation. All costs related to planning, development and construction of buildings prior to the date they become operational, including interest and real estate taxes during the construction period, are capitalized for financial reporting purposes and recorded as “Property under development” until construction has been completed. As of December 31, 2003, the cost to complete the properties under development is approximately $1,400,000.

Subsequent to completion of construction, expenditures for property maintenance are charged to operations as incurred, while significant renovations are capitalized. Depreciation of the buildings is recorded on the straight-line method using an estimated useful life of forty years.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market accounts.

Pursuant to an agreement, restricted cash is held in escrow for the acquisition of real estate investments.

F - 10

Agree Realty Corporation

Notes to Consolidated Financial Statements

Accounts Receivable - Tenants

Accounts receivable from tenants reflect primarily reimbursement of specified common area expenses. The Company determines its allowance for uncollectible accounts based on historical trends, existing economic conditions, and known financial position of its tenants. Tenant accounts receivable are written-off by the Company only when receipt is remote.

Investments in Unconsolidated Entities

The Company uses the equity method of accounting for investments in non-majority owned entities where the Company has the ability to exercise significant influence over operating and financial policies.

The Company’s initial investment is recorded at cost, and the carrying amount of the investment is (a) increased by the Company’s share of the investees’ earnings (as defined in the limited liability company agreements), and (b) reduced by distributions paid from the investees to the Company.

Unamortized Deferred Expenses

Deferred expenses are stated net of total accumulated amortization. The nature and treatment of these capitalized costs are as follows: (1) financing costs, consisting of expenditures incurred to obtain long-term financing, are being amortized using the interest method over the term of the related loan, and (2) leasing costs, which are amortized on a straight-line basis over the term of the related lease.

Other Assets

The Company records prepaid expenses, deposits and miscellaneous receivables as “other assets” in the accompanying balance sheets.

Accounts Payable - Capital Expenditures

Included in accounts payable are amounts related to the construction of buildings. Due to the nature of these expenditures, they are reflected in the statements of cash flows as a financing activity.

F - 11

Agree Realty Corporation

Notes to Consolidated Financial Statements

Minority Interest

This amount represents the limited partners’ interest (“OP Units”) of 9.48% and 13.15% (convertible into 637,547 shares) in the Operating Partnership as of December 31, 2003 and 2002, respectively.

Revenue Recognition

Minimum rental income attributable to leases is recorded when due from tenants. Certain leases provide for additional percentage rents based on tenants’ sales volume. These percentage rents are recognized as received by the Company. In addition, leases for certain tenants contain rent escalations and/or free rent during the first several months of the lease term; however, such amounts are not material.

Operating Cost Reimbursement

Substantially all of the Company’s leases contain provisions requiring tenants to pay as additional rent a proportionate share of operating expenses such as real estate taxes, repairs and maintenance, insurance, etc. The related revenue from tenant billings is recognized in the same period the expense is recorded.

Income Taxes

The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), and began operating as such on April 22, 1994. As a result, the Company is not subject to federal income taxes to the extent that it distributes annually at least 90% of its taxable income to its shareholders and satisfies certain other requirements defined in the Code. Accordingly, no provision was made for federal income taxes in the accompanying consolidated financial statements.

Stock Options

The Company has elected to adopt the recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation” (SFAS 123) using the prospective method beginning January 1, 2003. SFAS 123 establishes a fair value based method of accounting for stock-based compensation plans under which employees receive shares of stock or other equity instruments of the Company or the Company incurs liabilities to employees in amounts based on the price of its stock. No stock options were granted during 2003, 2002 or 2001 and there was no expense for stock options that would be required.

F - 12

Agree Realty Corporation

Notes to Consolidated Financial Statements

Dividends

The Company declared dividends of $1.94, $1.84 and $1.84 per share during the years ended December 31, 2003, 2002, and 2001; the dividends have been reflected for federal income tax purposes as follows:

December 31,	2003		2002		2001
Ordinary income	$	1.78	$	1.84	$	1.76
Return of capital		.16		—		.08
Total	$	1.94	$	1.84	$	1.84

The aggregate federal income tax basis of Real Estate Investments is approximately $17.3 million less than the financial statement basis.

Discontinued Operations

During October 2003 the Company completed the sale of a shopping center for approximately $8.5 million and recognized a gain of approximately $740,000, net of minority interest. The shopping center was anchored by Kmart Corporation and Kash N Karry and was located in Winter Garden, Florida. The gain on the sale and results of operations for this property are presented as discontinued operations in the Company’s Consolidated Statements of Income.

The revenues from this property were $878,462, $1,415,268 and $1,178,460 for the years ended December 31, 2003, 2002 and 2001, respectively. The expenses for this property were $407,704, $563,710 and $591,418, including minority interest charges of $60,152, $128,935 and $89,507, for the years ending December 31, 2003, 2002 and 2001, respectively.

F - 13

Agree Realty Corporation

Notes to Consolidated Financial Statements

Early Extinguishment of Debt

In August 2003, the Company repaid three mortgages totaling approximately $37,000,000 prior to their scheduled maturity. In connection with this transaction, the Company incurred a pre-payment penalty of $555,000 and wrote-off unamortized mortgage costs in the amount of $406,000.

Earnings Per Share

Earnings per share reflected in the consolidated statements of operations are presented for all periods in accordance with SFAS No. 128, “Earnings per Share”. In connection therewith, any conversion of OP Units to common stock would have no effect on the earnings per share calculation since the allocation of earnings to an OP Unit is equivalent to earnings allocated to a share of common stock.

The following table sets forth the computation of basic and diluted earnings per share:

December 31,		2003		2002		2001
Numerator
	Net income	$	10,471,746	$	8,772,330	$	8,065,653
	Income allocated to minority interests		1,338,046		1,328,233		1,229,819
Numerator for Basic and Diluted Earnings Per Share - Income Available to Shareholders After Assumed Conversions		$	11,809,792	$	10,100,563	$	9,295,472

F - 14

Agree Realty Corporation

Notes to Consolidated Financial Statements

December 31,		2003		2002		2001
Denominator
	Weighted average shares outstanding		5,272,523		4,446,791		4,416,869
	Weighted average OP Units outstanding, Assuming conversion		673,547		673,547		673,547
Denominator for Basic Earnings Per Share - Adjusted Weighted Average Shares and Assumed Conversions			5,946,070		5,120,338		5,090,416
Employee Stock Options			3,343		—		—
Denominator for Diluted Earnings Per Share			5,949,413		5,120,338		5,090,416

Options to purchase shares of common stock were outstanding (see Note 9) but were not included in the computation of diluted earnings per share in 2002 and 2001 because the options exercise price was greater than the average market price of the common shares and, therefore, any additional shares would be anti-dilutive.

Recent Accounting Pronouncements

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”). The objective of SFAS 150 is to establish standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. In November 2003, the FASB indefinitely delayed the effective date for certain mandatorily redeemable noncontrolling interests in consolidated financial statements. Adoption of SFAS 150 did not have an impact on the results of operations or financial position of the Company.

F - 15

Agree Realty Corporation

Notes to Consolidated Financial Statements

3.     Mortgages Payable

Mortgages payable consisted of the following:

December 31,	2003		2002
Note payable in monthly installments of $153,838 including interest at 6.90% per annum, with the final monthly payment due January 2020; collateralized by related real estate and tenants’ leases	$	17,856,063	$	18,447,700
Note payable in monthly installments of $128,205 including interest at 6.20% per annum, with a final monthly payment due November 2018; collateralized by related real estate and tenants’ leases		14,898,328		—
Note payable in monthly installments of $99,598 including interest at 6.63% per annum, with the final monthly payment due February 2017; collateralized by related real estate and tenants’ leases		10,478,580		10,961,509
Note payable in monthly installments of $57,403 including interest at 6.50% per annum, with the final monthly payment due February 2023; collateralized by related real estate and tenant lease		7,538,278		—

F - 16

Agree Realty Corporation

Notes to Consolidated Financial Statements

December 31,	2003		2002
Note payable in monthly installments of $25,631 including interest at 7.50% per annum, with the final monthly payment due May 2022; collateralized by related real estate and tenant lease		3,066,134		3,140,687
Note payable in monthly installments of $12,453 including interest at 6.95% per annum, with the final monthly payment due December 2017; collateralized by related real estate and tenant lease		1,239,682		1,301,866
Note payable in monthly installments of $6,449 including interest at 6.00% per annum, with the final monthly payment due July 2023; collateralized by related real estate and tenant lease		890,313		—
Note payable in monthly installments of $249,750 including interest at 7.0% per annum, with the remaining balance of $28,221,503 due November 2005; collateralized by related real estate and tenants’ leases; repaid in 2003		—		30,910,623
Other – repaid in 2003		—		6,826,478
Total	$	55,967,378	$	71,588,863

Future scheduled annual maturities of mortgages payable for years ending December 31 are as follows: 2004 - $2,049,975; 2005 - $2,298,292; 2006 - $2,454,764; 2007 - $2,621,920; 2008 - $2,781,076; and $43,761,351 thereafter.

F - 17

Agree Realty Corporation

Notes to Consolidated Financial Statements

4.     Construction Loans

The Company’s wholly-owned subsidiaries obtained construction financing totalling approximately $-0- in 2003 and $4,350,000 in 2002, which was available to fund the development of certain retail properties. Quarterly interest payments were made based on LIBOR. The notes were repaid during 2003 and were secured by the related land and building. The Company owed $4,002,873 for these loans at December 31, 2002 with a weighted average interest rate of 3.70%.

The Company has also received funding from an unaffiliated third party for one of its single tenant retail properties. Borrowings under this arrangement bear no interest. The advances are secured by the specific land and buildings being developed. The Company owed $1,569,000 and $1,609,440 for these advances as of December 31, 2003 and 2002, respectively.

F - 18

Agree Realty Corporation

Notes to Consolidated Financial Statements

5.     Notes Payable

The Operating Partnership has in place a $50 million line-of-credit agreement, which is guaranteed by the Company. The agreement expires in August 2006 and can be extended, solely at the option of the Operating Partnership, for an additional three years. Advances under the Credit Facility bear interest within a range of one-month to six-month LIBOR plus 150 basis points to 213 basis points or the bank’s prime rate, at the option of the Company, based on certain factors such as debt to property value and debt service coverage. The Credit Facility is used to fund property acquisitions and development activities and is secured by most of the Company’s Properties which are not otherwise encumbered and properties to be acquired or developed. At December 31, 2003 and 2002, $24,000,000 and $36,758,232, respectively, was outstanding under this facility with a weighted average interest rate of 2.74% and 2.94%, respectively.

In addition, the Company maintains a $5,000,000 line-of-credit agreement with a bank. Monthly interest payments are required, either at the bank’s prime rate less 50 basis points, or 175 basis points in excess of the one-month LIBOR rate, at the option of the Company. At December 31, 2003 and 2002, $2,500,000 and $1,325,000, respectively, was outstanding under this agreement with a weighted average interest rate of 3.50% and 3.75%, respectively.

6.     Dividends and Distributions Payable

On December 8, 2003 the Company declared a dividend of $.485 per share for the quarter ended December 31, 2003. The holders of OP Units were entitled to an equal distribution per OP Unit held as of December 31, 2003. The dividends and distributions payable are recorded as liabilities in the Company’s balance sheet at December 31, 2003. The dividend has been reflected as a reduction of stockholders’ equity and the distribution has been reflected as a reduction of the limited partners’ minority interest. These amounts were paid on January 6, 2004.

F - 19

Agree Realty Corporation

Notes to Consolidated Financial Statements

7.     Minority Interest

The following summarizes the changes in minority interest since January 1, 2001:

Minority Interest at January 1, 2001	$	5,707,608
Minority interests’ share of income for the year		1,229,819
Distributions for the year		(1,239,326	)
Minority Interest at December 31, 2001		5,698,101
Minority interests’ share of income for the year		1,328,233
Distributions for the year		(1,239,327	)
Minority Interest at December 31, 2002		5,787,007
Minority interests’ share of income for the year		1,338,046
Distributions for the year		(1,303,314	)
Minority Interest at December 31, 2003	$	5,821,739

8.     Related Party Transactions

During 2001, the Company managed certain additional properties, which are owned by certain officers and directors of the Company, but are not included in the consolidated financial statements. Income related to these activities is reflected as “other income” in the accompanying consolidated statements of income.

9.     Stock Incentive Plan

The Company has established a stock incentive plan (the “Plan”) under which options were granted in April 1994. The options, which have an exercise price equal to the initial public offering price ($19.50/share), can be exercised in increments of 25% on each anniversary of the date of the grant, and expire upon employment termination. All 23,275 options outstanding were exercisable at December 31, 2003 and 2002. No options were exercised or granted during 2003, 2002 or 2001.

F - 20

Agree Realty Corporation

Notes to Consolidated Financial Statements

10.     Unearned Compensation - Restricted Stock

As part of the Company’s stock incentive plan, restricted common shares are granted to certain employees. On the date of the award, the Company increases unearned compensation – restricted stock on the balance sheet by the stock price multiplied by the number of shares awarded. The restricted shares vest and are charged to expense in increments of 20% per year for five years. Plan participants are entitled to receive the quarterly dividends on their respective restricted shares. The following table summarizes the restricted shares for the years ended December 31, 2003, 2002 and 2001:

	2003			2002			2001
Restricted shares outstanding January 1		168,996			137,334			115,134
Restricted shares granted during the year		36,814			37,662			27,291
Restricted shares redeemed during the year		(6,000	)		(6,000	)		(5,091	)
Restricted shares outstanding December 31		199,810			168,996			137,334
Compensation Expense Recorded Related to Restricted Common Shares	$	367,910		$	315,245		$	266,252

11.     Profit-Sharing Plan

The Company has a discretionary profit-sharing plan whereby it contributes to the plan such amounts as the Board of Directors of the Company determines. The participants in the plan cannot make any contributions to the plan. Contributions to the plan are allocated to the employees based on their percentage of compensation to the total compensation of all employees for the plan year. Participants in the plan become fully vested after six years of service. No contributions were made to the plan in 2003, 2002 or 2001.

12.     Rental Income

The Company leases premises in its properties to tenants pursuant to lease agreements, which provide for terms ranging generally from 5 to 25 years. The majority of leases provide for additional rents based on tenants’ sales volume.

F - 21

Agree Realty Corporation

Notes to Consolidated Financial Statements

As of December 31, 2003, the future minimum revenues for the next five years from rental property under the terms of all noncancellable tenant leases, assuming no new or renegotiated leases are executed for such premises, are as follows (in thousands):

2004	$	25,130
2005		24,582
2006		23,311
2007		22,716
2008		22,142
Thereafter		176,075
Total	$	293,956

Of these future minimum rentals, approximately 34% of the total is attributable to Borders, Inc., approximately 25% of the total is attributable to Walgreen and approximately 18% is attributable to Kmart Corporation. Borders is a major operator of book superstores in the United States, Walgreen operates in the national drugstore chain industry and Kmart’s principal business is general merchandise retailing through a chain of discount department stores. The loss of any of these anchor tenants or the inability of any of them to pay rent could have an adverse effect on the Company’s business.

In May 2003 Kmart emerged from the bankruptcy proceeding, which it had initiated in January 2002. Pursuant to the confirmed plan of reorganization, Kmart closed approximately 600 of its stores, including one of which was located on our property in Lakeland, Florida.

F - 22

Agree Realty Corporation

Notes to Consolidated Financial Statements

The Company has entered into fourteen (14) leases with Kmart Corporation. Eleven (11) of the Kmart stores are anchors in the Company’s Community Shopping Centers and three (3) Kmart stores are free-standing properties. The Kmart stores are located in four states as follows: Michigan (9), Wisconsin (3), Ohio (1) and Kentucky (1). At December 31, 2003, all fourteen (14) of the Kmart stores were open and operating as Kmart discount stores.

13.     Lease Commitments

The Company has entered into certain land lease agreements for four of its properties. As of December 31, 2003, future annual lease commitments under these agreements are as follows:

Year Ended December 31,
2004	$	725,443
2005		764,768
2006		768,343
2007		774,619
2008		760,424
Thereafter		11,278,887
Total	$	15,072,484

F - 23

Agree Realty Corporation

Notes to Consolidated Financial Statements

14.     Interim Results (Unaudited)

The following summary represents the unaudited results of operations of the Company, expressed in thousands except per share amounts, for the periods from January 1, 2002 through December 31, 2003. Certain amounts have been reclassified to conform to the current presentation of discontinued operations:

Three Months Ended
2003	March 31,		June 30,		September 30,		December 31,
Revenues	$	6,693	$	6,784	$	6,733	$	7,262
Income before discontinued operations	$	2,093	$	2,254	$	1,713	$	3,201
Discontinued operations, net of minority interest		151		120		144		796
Net Income	$	2,244	$	2,374	$	1,857	$	3,997
Earnings Per Share	$	.50	$	.53	$	.33	$	.63

Three Months Ended
2002	March 31,		June 30,		September 30,		December 31,
Revenues	$	5,858	$	5,867	$	5,966	$	6,718
Income before discontinued operations	$	1,772	$	1,933	$	1,927	$	2,289
Discontinued operations, net of minority interest		170		188		210		283
Net Income	$	1,942	$	2,121	$	2,137	$	2,572
Earnings Per Share	$	.44	$	.48	$	.48	$	.57

F - 24

Agree Realty Corporation

Schedule III - Real Estate and Accumulated Depreciation
December 31, 2003

Column A		Column B		Column C				Column D			Column E
											Gross Amount at Which Carried
				Initial Cost				Costs			at Close of Period
								Capitalized
						Buildings and		Subsequent to					Buildings and
Description		Encumbrance		Land		Improvements		Acquisition			Land		Improvements		Total
Completed Retail Facilities
	Sam’s Club (Borman), MI	$	897,602	$	550,000	$	562,404	$	1,087,596		$	550,000	$	1,650,000	$	2,200,000
	Capital Plaza, KY		1,135,100		7,379		2,240,607		534,115			7,379		2,774,722		2,782,101
	Charlevoix Common, MI		—		305,000		5,152,992		106,718			305,000		5,259,710		5,564,710
	Chippewa Commons, WI		—		1,197,150		6,367,560		353,149			1,197,150		6,720,709		7,917,859
	Grayling Plaza, MI		807,294		200,000		1,778,657		—			200,000		1,778,657		1,978,657
	Iron Mountain Plaza, MI		3,339,373		677,820		7,014,996		491,900			677,820		7,506,896		8,184,716
	Ironwood Commons, MI		3,508,997		167,500		8,181,306		251,653			167,500		8,432,959		8,600,459
	Marshall Plaza Two, MI		—		—		4,662,230		115,294			—		4,777,524		4,777,524
	North Lakeland Plaza, FL		—		1,641,879		6,364,379		824,023			1,641,879		7,188,402		8,830,281
	Oscoda Plaza, MI		838,911		183,295		1,872,854		—			183,295		1,872,854		2,056,149
	Perrysburg Plaza, OH		—		21,835		2,291,651		354,704			345,538		2,322,651		2,668,189
	Petoskey Town Center, MI		—		875,000		8,895,289		217,603			875,000		9,112,892		9,987,892
	Plymouth Commons, WI		—		535,460		5,667,504		279,073			535,460		5,946,577		6,482,037
	Rapids Associates, MI		—		705,000		6,854,790		27,767			705,000		6,882,557		7,587,557
	Shawano Plaza, WI		—		190,000		9,133,934		101,471			190,000		9,235,405		9,425,405
	West Frankfort Plaza, IL		381,619		8,002		784,077		143,258			8,002		927,335		935,337
	Omaha Store, NE		1,534,650		1,705,619		2,053,615		2,152			1,705,619		2,055,767		3,761,386
	Wichita Store, KS		1,123,841		1,039,195		1,690,644		24,666			1,039,195		1,715,310		2,754,505
	Santa Barbara Store, CA		2,284,247		2,355,423		3,240,557		2,650			2,355,423		3,243,207		5,598,630
	Monroeville, PA		3,501,417		6,332,158		2,249,724		—			6,332,158		2,249,724		8,581,882
	Norman, OK		1,022,476		879,562		1,626,501		—			879,562		1,626,501		2,506,063
	Columbus, OH		1,290,422		826,000		2,336,791		—			826,000		2,336,791		3,162,791
	Aventura, FL		1,294,637		—		3,173,121		—			—		3,173,121		3,173,121
	Boyton Beach, FL		3,669,008		3,103,942		2,043,122		—			3,103,942		2,043,122		5,147,064
	Lawrence, KS		3,066,134		—		3,000,000		155,407			—		3,155,407		3,155,407
	Waterford, MI		2,523,242		971,009		1,562,869		135,390			971,009		1,698,259		2,669,268
	Chesterfield Township, MI		2,770,537		1,350,590		1,757,830		(46,164	)		1,350,590		1,711,666		3,062,256

[Additional columns below]

[Continued from above table, first column(s) repeated]

Column A		Column F		Column G		Column H
						Life
						on Which
						Depreciation
						in Latest
						Income
		Accumulated		Date of		Statement
Description		Depreciation		Construction		is Computed
Completed Retail Facilities
	Sam’s Club (Borman), MI	$	1,164,280		1977	40 Years
	Capital Plaza, KY		1,550,301		1978	40 Years
	Charlevoix Common, MI		1,715,296		1991	40 Years
	Chippewa Commons, WI		2,206,661		1990	40 Years
	Grayling Plaza, MI		887,510		1984	40 Years
	Iron Mountain Plaza, MI		2,288,003		1991	40 Years
	Ironwood Commons, MI		2,630,732		1991	40 Years
	Marshall Plaza Two, MI		1,505,757		1990	40 Years
	North Lakeland Plaza, FL		2,867,046		1987	40 Years
	Oscoda Plaza, MI		929,263		1984	40 Years
	Perrysburg Plaza, OH		1,164,992		1983	40 Years
	Petoskey Town Center, MI		2,899,900		1990	40 Years
	Plymouth Commons, WI		1,931,064		1990	40 Years
	Rapids Associates, MI		2,271,584		1990	40 Years
	Shawano Plaza, WI		3,125,549		1990	40 Years
	West Frankfort Plaza, IL		441,933		1982	40 Years
	Omaha Store, NE		417,570		1995	40 Years
	Wichita Store, KS		348,347		1995	40 Years
	Santa Barbara Store, CA		658,767		1995	40 Years
	Monroeville, PA		400,479		1996	40 Years
	Norman, OK		294,612		1996	40 Years
	Columbus, OH		462,487		1996	40 Years
	Aventura, FL		611,487		1996	40 Years
	Boyton Beach, FL		361,615		1996	40 Years
	Lawrence, KS		488,806		1997	40 Years
	Waterford, MI		253,706		1997	40 Years
	Chesterfield Township, MI		235,933		1998	40 Years

F - 25

Agree Realty Corporation

Schedule III - Real Estate and Accumulated Depreciation
December 31, 2003

Column A			Column B		Column C				Column D			Column E
												Gross Amount at Which Carried
					Initial Cost				Costs			at Close of Period
									Capitalized
							Buildings and		Subsequent to					Buildings and
Description			Encumbrance		Land		Improvements		Acquisition			Land		Improvements		Total
	Grand Blanc, MI			2,646,889		1,104,285		1,998,919		13,968			1,104,285		2,012,887		3,117,172
	Pontiac, MI			2,537,912		1,144,190		1,808,955		(113,506	)		1,144,190		1,695,449		2,839,639
	Mt. Pleasant Shopping Center, MI			—		907,600		8,081,968		403,100			907,600		8,485,068		9,392,668
	Tulsa, OK			—		1,100,000		2,394,512		—			1,100,000		2,394,512		3,494,512
	Columbia, MD			3,496,638		1,545,509		2,093,700		286,589			1,545,509		2,380,289		3,925,798
	Rochester, MI			3,578,355		2,438,740		2,188,050		1,949			2,438,740		2,189,999		4,628,739
	Ypsilanti, MI			3,231,947		2,050,000		2,222,097		29,624			2,050,000		2,251,721		4,301,721
	Germantown, MD			3,288,061		1,400,000		2,288,890		45,000			1,400,000		2,333,890		3,733,890
	Petoskey, MI			2,248,078		—		2,332,473		(16,325	)		—		2,316,148		2,316,148
	Flint, MI			3,390,866		2,026,625		1,879,700		(1,201	)		2,026,625		1,878,499		3,905,124
	Flint, MI			2,917,681		1,477,680		2,241,293		—			1,477,680		2,241,293		3,718,973
	New Baltimore, MI			2,489,135		1,250,000		2,285,781		(16,502	)		1,250,000		2,269,279		3,519,279
	Flint, MI			1,439,407		1,729,851		1,798,091		—			1,729,851		1,798,091		3,527,942
	Oklahoma City, OK			4,231,125		1,914,859		2,057,034		—			1,914,859		2,057,034		3,971,893
	Omaha, NE			3,882,504		1,530,000		2,237,702		—			1,530,000		2,237,702		3,767,702
	Indianapolis, IN			1,239,682		180,000		1,117,617		—			180,000		1,117,617		1,297,617
	Big Rapids, MI			—		1,201,675		2,014,107		—			1,201,675		2,014,107		3,215,782
	Flint, MI			890,313		—		1,310,787		—			—		1,310,787		1,310,787
	Ann Arbor, MI			7,538,278		1,727,590		6,009,488		—			1,727,590		6,009,488		7,737,078
	Tulsa, OK			—		2,000,000		2,740,507		—			2,000,000		2,740,507		4,740,507
	Canton Twp, MI			—		1,550,000		2,132,096		—			1,550,000		2,132,096		3,682,096
Sub Total				84,036,378		54,107,422		155,793,771		5,795,121			54,431,125		161,265,188		215,696,313
Retail Facilities
	Under Development
		Waterford, MI		—		800,081		368,661		—			800,081		368,661		1,168,742
		Flint, MI		—		1,537,400		1,784,089		—			1,537,400		1,784,089		3,321,489
		Webster, NY		—		—		203,180		—			—		203,180		203,180
		Other		—		80,000		754,905		—			80,000		754,905		834,905
				—		2,417,481		3,110,835		—			2,417,481		3,110,835		5,528,316
Total			$	84,036,378	$	56,524,903	$	158,904,606	$	5,795,121		$	56,848,606	$	164,376,023	$	221,224,629

[Additional columns below]

[Continued from above table, first column(s) repeated]

Column A			Column F		Column G		Column H
							Life
							on Which
							Depreciation
							in Latest
							Income
			Accumulated		Date of		Statement
Description			Depreciation		Construction		is Computed
	Grand Blanc, MI			251,957		1998	40 Years
	Pontiac, MI			224,236		1998	40 Years
	Mt. Pleasant Shopping Center, MI			1,468,734		1973	40 Years
	Tulsa, OK			330,034		1998	40 Years
	Columbia, MD			256,857		1999	40 Years
	Rochester, MI			246,351		1999	40 Years
	Ypsilanti, MI			225,216		1999	40 Years
	Germantown, MD			231,965		2000	40 Years
	Petoskey, MI			214,633		2000	40 Years
	Flint, MI			140,889		2000	40 Years
	Flint, MI			161,092		2001	40 Years
	New Baltimore, MI			134,913		2001	40 Years
	Flint, MI			76,800		2002	40 Years
	Oklahoma City, OK			59,945		2002	40 Years
	Omaha, NE			65,186		2002	40 Years
	Indianapolis, IN			32,614		2002	40 Years
	Big Rapids, MI			37,765		2003	40 Years
	Flint, MI			30,039		2003	40 Years
	Ann Arbor, MI			147,893		2003	40 Years
	Tulsa, OK			20,526		2003	40 Years
	Canton Twp, MI			4,442		2003	40 Years
Sub Total				38,475,767
Retail Facilities
	Under Development
		Waterford, MI		—		N/A		N/A
		Flint, MI				N/A		N/A
		Webster, NY		—		N/A		N/A
		Other		—		N/A		N/A
				—
Total			$	38,475,767

F - 26

Agree Realty Corporation

Notes to Schedule III
December 31, 2003

1) Reconciliation of Real Estate Properties

The following table reconciles the Real Estate Properties from January 1, 2001 to December 31, 2003:

	2003			2002		2001
Balance at January 1	$	210,985,666		$	196,485,828	$	191,047,902
Construction and acquisition costs		20,686,947			14,499,838		5,437,926
Sale of real estate asset		(10,447,984	)		—		—
Balance at December 31	$	221,224,629		$	210,985,666	$	196,485,828

2) Reconciliation of Accumulated Depreciation

The following table reconciles the accumulated depreciation from January 1, 2001 to December 31, 2003:

	2003			2002		2001
Balance at January 1	$	37,456,301		$	33,634,461	$	29,907,682
Current year depreciation expense		4,145,898			3,821,840		3,726,779
Sale of real estate asset		(3,126,432	)		—		—
Balance at December 31	$	38,475,767		$	37,456,301	$	33,634,461

3)	Tax Basis of Buildings and Improvements
	The aggregate cost of Building and Improvements for federal income tax purposes is approximately $17,328,000 less than the cost basis used for financial statement purposes.

F - 27

EXHIBIT INDEX

Exhibit Number	Description
10.33	Indemnity Deed of Trust and Security Agreement dated October 31, 2003, by Agree – Columbia Crossing Project, L.L.C., and Nationwide Life Insurance Company
10.34	Indemnity Deed of Trust and Security Agreement dated October 31, 2003, by Agree-Milestone Center Project, L.L.C., and Nationwide Life Insurance Company
10.35	Mortgage and Security Agreement dated October 31, 2003, by Oklahoma Store No. 151, L.L.C. and Nationwide Life Insurance
10.36	Deed of Trust and Security Agreement dated October 31, 2003, by Omaha Store No. 166, L.L.C. and Nationwide Life Insurance Company
14.1	Chief Executive Officer and Chief Financial Officer Code of Professional Ethics.
21.1	Subsidiaries of Agree Realty Corporation
23	Consent of BDO Seidman, LLP
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Richard Agree, Chief Executive Officer
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Kenneth R. Howe, Chief Financial Officer
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Richard Agree, Chief Executive Officer
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Kenneth R. Howe, Chief Financial Officer

EX-10.33 3 k82459exv10w33.txt INDEMNITY DEED OF TRUST AGREEMENT - COLUMBIA EXHIBIT 10.33 Recorded at the Request of and When Recorded Return to: Pepe & Hazard LLP NOT SUBJECT TO 225 Asylum Street - 22nd Floor RECORDATION TAX Hartford, CT 06103-4302 Attention: Adam F. Zweifler, Esq. MAXIMUM PRINCIPAL AMOUNT SECURED IS $3,520,000.00 GRANTOR NOT PRIMARILY LIABLE FOR DEBT SECURED INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT This INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT (the "DEED OF TRUST") is dated as of the 31st day of October, 2003, by AGREE - COLUMBIA CROSSING PROJECT, L.L.C., a Delaware limited liability company ("GRANTOR"), having its principal office at 31850 Northwestern Highway, Farmington Hills, Michigan 48334 to and in favor of JON M. LARIA AND ANNE HEESTERS SCHROTH, having an address c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, 18th Floor, Baltimore, Maryland 21202 (collectively, the "TRUSTEE"), as trustee for NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its successors and assigns ("LENDER"), having its principal office at One Nationwide Plaza, Columbus, Ohio 43215-2220, Attention: Real Estate Investment Department, 34T, or at such other place as Lender may from time to time designate. W I T N E S S E T H: WHEREAS, Lender has made four loans of even date herewith in the aggregate total original principal amount of Fifteen Million Dollars ($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the following loans of even date herewith: a loan from Lender to ACCP Maryland LLC, a Delaware limited liability company (the "BORROWER"), in the original principal amount of $3,520,000.00 (this "LOAN"); a loan to AMCP Germantown LLC, a Delaware limited liability company ("AGREE-MILESTONE"), in the original principal amount of $3,310,000.00 (the "AGREE-MILESTONE LOAN"); a loan to Omaha Store No. 166 L.L.C., a Delaware limited liability company ("OMAHA") in the original principal amount of $3,910,000.00 (the "OMAHA LOAN"); and a loan to Oklahoma City Store No. 151 L.L.C., a Delaware limited liability company ("OKLAHOMA CITY"), in the original principal amount of $4,260,000.00 (the "OKLAHOMA CITY LOAN"). Agree-Milestone, Omaha and Oklahoma City are hereinafter referred to collectively as the "AFFILIATED BORROWERS". The Columbia, Maryland Agree-Milestone Loan, the Omaha Loan and the Oklahoma City Loan are hereinafter referred to generically as an "AFFILIATE LOAN" and collectively as the "AFFILIATE LOANS"; WHEREAS, the Borrower is justly indebted to Lender under the Loan in the original principal sum of Three Million Five Hundred Twenty Thousand and 00/100 Dollars ($3,520,000.00), with interest thereon, which Loan is evidenced and represented by that certain Note of even date herewith (which Note, as the same may be extended, renewed, replaced, amended, restated or otherwise modified, are hereinafter referred to as the "NOTE"), both principal and interest being payable as therein provided, with the first payment on the Note becoming due and payable on the date of disbursement; and WHEREAS, Grantor has guaranteed to Lender the payment and performance of Borrower's obligations under the Note pursuant to a Guaranty Agreement of even date herewith by Grantor (which Guaranty Agreement, as the same may be extended, renewed, replaced, amended, restated or otherwise modified, is hereinafter referred to as the "GRANTOR'S GUARANTY"). The terms, covenants and conditions of the Grantor's Guaranty are hereby specifically incorporated in this Deed of Trust by reference; and WHEREAS, Lender, as a condition precedent to the extension of credit and the making of the Loan, evidenced by the Note and guaranteed by the Grantor's Guaranty, has required that Grantor provide Lender with security for the repayment of the Loan as well as for the performance, observance and discharge by Grantor of various terms, covenants, conditions and agreements made by Grantor to, with, in favor of and for the benefit of Lender with respect to the Loan and such security; WHEREAS, (i) the Grantor's obligations under the Grantor's Guaranty represent a contingent liability that does not mature until there has been an uncured default by Borrower under the Loan Documents, (ii) Grantor and Borrower are separate and distinct entities, and (iii) Grantor is not primarily liable for the obligations of Borrower under the Loan Documents. NOW THEREFORE, in consideration of and in order to secure the repayment of the amounts due under the Grantor's Guaranty, together with interest thereon, as well as the payment of all other sums of money secured hereby, as hereinafter provided; to secure the observance, performance and discharge by Grantor of all terms, covenants, conditions and agreements set forth in the Grantor's Guaranty, this Deed of Trust, and in all other documents and instruments executed and delivered by Grantor to and in favor of Lender for the purpose of further securing the repayment of the Grantor's Guaranty; in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of one dollar paid by Lender to Grantor, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged by Grantor, Grantor does hereby grant, bargain, sell, convey, assign, transfer, pledge, deliver, hypothecate, warrant and confirm unto Lender forever, all of Columbia, Maryland 2 Grantor's right, title and interest in and to the following described properties, including all rights, interests, replacements, substitutions and additions thereto, therein or therefore (collectively, the "DEED OF TRUST PROPERTY"): (i) All that certain piece, parcel or tract of land or real property of which Grantor is now seized and in actual or constructive possession, situated in the City of Columbia, County of Howard, and State of Maryland (the "STATE"), and being more particularly described on EXHIBIT A attached hereto and by this reference made a part hereof (the "REAL PROPERTY"); (ii) All buildings, structures and other improvements of any kind, nature or description now or hereafter erected, constructed, placed or located upon the Real Property (the "IMPROVEMENTS"), including, without limitation, any and all additions to, substitutions for or replacements of such Improvements; (iii) All minerals, royalties, gas rights, water, water rights, water stock, flowers, shrubs, lawn plants, crops, trees, timber and other emblements now or hereafter located on, under or above all or any part of the Real Property; (iv) All and singular, the tenements, hereditaments, strips and gores, rights-of-way, easements, privileges, profits and other appurtenances now or hereafter belonging or in any way appertaining to the Real Property, including, without limitation, all right, title and interest of the Grantor in any after-acquired right, title, interest, remainder or reversion in and to the beds of any ways, streets, avenues, roads, alleys, passages and public places, open or proposed, in front of, running through, adjoining or adjacent to the Real Property (the "APPURTENANCES"); (v) Any and all leases, licenses, contracts, rents, license fees, royalties, issues, revenues, profits, proceeds, deposits, income and other benefits, including accounts receivable, termination fees, of, accruing to or derived from the Real Property, Improvements and Appurtenances, and any business or enterprise presently situated or hereafter operated thereon and therewith and all of Grantor's right, title and interest under any and all lease guaranties, letters of credit, and any other credit support furnished to Grantor in connection with any of the foregoing (the "RENTS"); (vi) Any and all awards, payments or settlements, including interest thereon, and the right to receive the same, as a result of: (a) the exercise of the right of eminent domain; (b) the alteration of the grade of any way, street, avenue, road, alley, passage or public place; (c) any other injury, damage, casualty or claim relating to the taking of, or decrease in the value of, the Real Property, Improvements or Appurtenances; or (d) proceeds of insurance awards, to the extent of all amounts which may be secured by this Deed of Trust at the date of any such award or payment including but not limited to Reasonable Attorneys' Fees (as hereinafter Columbia, Maryland 3 defined), costs and disbursements incurred by Lender in connection with the collection of such award or payment; (vii) All fixtures, materials, equipment, machinery, apparatus, appliances, and other property whatsoever now or hereafter attached to, installed in, or used in connection with the buildings and other improvements now erected or hereafter to be erected on said land, including, but not limited to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators, air-conditioning and sprinkler systems, gas and electric fixtures, carpets, rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all other furnishings, tools, equipment and machinery, appliances, building supplies, materials, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing, all of which property and things are hereby declared to be permanent fixtures and accessions to the freehold and part of the realty conveyed herein as security for the indebtedness herein mentioned; and (viii) All agreements or contracts relating to any interest rate cap agreements, swaps or other interest hedging agreements; TO HAVE AND TO HOLD the foregoing Deed of Trust Property and the rights hereby granted for its use and benefit unto Lender, Trustees and its successors and assigns in fee simple forever, successors in interest of Trustees, in trust, in fee simple forever; FIRST: Until any default in payment of any matter of indebtedness hereby secured as herein provided for, or until breach of any of the covenants, agreements, terms or conditions herein contained, to permit Grantor, its successors and assigns, to possess and enjoy said Property and to receive the rents, issues and profits thereof; and on full payment of the Note, the Grantor's Guaranty, and of any extensions or renewals thereof, and interest thereon, and all sums advanced or expended as herein provided, and all other proper costs, charges, expenses, commissions, at any time before the sale hereinafter provided for, to release and reconvey unto and at the cost of Grantor, or the party or parties then claiming under Grantor, the aforesaid Property. SECOND: Upon any default being made in payment under the Grantor's Guaranty or any installment of principal, interest or either, due thereunder, or any renewal or extension thereof, or this Deed of Trust; or upon any default in the performance of any of the covenants, conditions or agreements herein or in the Grantor's Guaranty contained; then upon any such default so made as aforesaid: The Grantor, in accordance with the Maryland Rules of Procedure or any Public General Law or Public Local Law of the State of Maryland relating to deeds of trust or mortgages, including any supplements, amendments or additions thereto, does hereby assent to Columbia, Maryland 4 the passage of a decree by the Circuit Court for Howard County, as may be required by applicable law; or The Trustees or substitute Trustees shall have the power and, upon the direction of the Lender, the duty to sell and in the event of default by any purchaser, to re-sell the herein described Property. Upon any such sale, whether made under the assent to the passing of a decree or under the power of sale, the party selling may sell the Property as a whole or in such parcel or parcels, manner or order, as such party selling may, in its sole discretion, elect; such sale may also be at the sole discretion of the party selling subject to any one or more existing tenancies. Such sale shall be at public auction at such time and place, upon such terms and conditions, and after such previous public notice (in compliance with the Maryland Rules of Procedure and any other applicable law) as Trustees, or substitute Trustees, shall deem best for the interest of all parties concerned, and (the terms of the sale being complied with), Trustees shall convey to the purchaser or purchasers at the cost of such purchaser or purchasers, the Property so sold, such purchaser or purchasers being hereby discharged from all liability for the application of the purchase money; and shall apply the proceeds of sale (after paying from the proceeds all expenses of sale of every kind and nature whatsoever, including, without limitation, reasonable attorneys' fees, all taxes and assessments thereon due, all insurance premiums and fees for guard or watchmen services, all utility charges of whatsoever nature whether or not listed on the real property tax bill, all sums advanced as herein provided, and a trustees' commission equal to the commission allowed trustees for making sales of property under decrees of the equity courts having jurisdiction), to the payment of the indebtedness due and outstanding under the Grantor's Guaranty whether matured or not, and the interest thereon, to date of payment from purchaser, paying over the surplus, if any, to Grantor, its successors or assigns, upon the surrender and delivery to the purchaser or to the heirs, personal representatives, successors or assigns of purchaser, of the possession of the Property so sold and conveyed, less the expense, if any, of obtaining possession thereof. Half of such commissions and all such expenses and costs shall be paid by Grantor, its heirs, successors or assigns in the event that the debt evidenced by the Note shall be paid after any advertisement of the Property, but before sale thereof. The Trustees may act hereunder and may sell and convey said Property under power granted above although the Trustees have been, may now be or may hereafter be attorneys or agents of the Lender. In the event that the purchaser at such sale or resale shall be the then holder of the Note, the Grantor's Guaranty which is entitled to receive the proceeds of such sale, then the person responsible for conducting the sale shall accept on account of the purchase price, without requiring the actual payment of money, the written receipt of such purchaser for up to the amount of proceeds to which such purchaser is entitled, except such sums as are necessary to pay the above-mentioned expenses of sale. The holder of the Note, the Grantor's Guaranty, as purchaser, need not tender cash or the equivalent thereof as a required deposit in connection with any such sale. Columbia, Maryland 5 Grantor, in addition, agrees that Lender, may in the event of default, proceed under the Uniform Commercial Code as presently contained in the Commercial Law Article of the Annotated Code of Maryland, and any and all amendments, additions and supplements thereto as to all or any part of the chattels, personal property, equipment and fixtures included in the Property described aforesaid and Grantor agrees that the Trustees shall have and may exercise with respect to all such chattels, personal property, equipment and fixtures aforesaid, all the rights, remedies and powers of a secured party under the Uniform Commercial Code including, without limitation, the right and power to replevy, sell or otherwise dispose of, foreclose upon, lease or utilize all or any part of such chattels, personal property, equipment and fixtures aforesaid in any manner authorized or permitted under said Uniform Commercial Code. In order to secure the repayment of the Loan guaranteed by the Grantor's Guaranty, together with interest on the Loan, as well as the payment of all other sums of money secured hereby, as hereinafter provided; and to secure the observance, performance and discharge by Grantor of all covenants, conditions and agreements set forth in the Grantor's Guaranty, this Deed of Trust and in the other documents and instruments executed and delivered by Grantor to and in favor of Lender for the purpose of further securing the repayment of the Loan guaranteed by the Grantor's Guaranty; and in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of Ten Dollars ($10.00) paid by Lender and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Grantor hereby grants Trustees, their successors and assigns, a security interest in all Fixtures, Goods (including, without limitation, Consumer Goods, Inventory, Equipment and Farm Products), Accounts, Chattel Paper (including, without limitation, Electronic Chattel Paper and Tangible Chattel Paper), Instruments, General Intangibles (including, without limitation, Payment Intangibles and Software), Letters of Credit, Letter-of-Credit Rights, Documents, As-Extracted Collateral, Money and Deposit Accounts of every kind, and all proceeds thereof, including, without limitation, any and all licenses, permits, franchises, trademarks, trade names, service marks or logos, plans, specifications, maps, construction contracts, instruments, insurance policies, fittings and fixtures of every kind, which is, are or shall hereafter be located upon, attached, affixed to or used or useful, either directly or indirectly, in connection with the complete and comfortable use, occupancy and operation of the Real Property, Improvements or Appurtenances as a retail project (the "EXISTING USE"), or any other business, enterprise or operation as may hereafter be conducted upon or with said Real Property, Improvements or Appurtenances, including, without limitation, any and all licenses, permits or franchises, used or required in connection with such use, occupancy or operation as well as the proceeds thereof or therefrom regardless of form, all security deposits and advance rentals under lease agreements now or at any time hereafter covering or affecting any of the Property and held by or for the benefit of Grantor, all monetary deposits which Grantor has been required to give to any public or private utility with respect to utility services furnished to the Real Property or Improvements, all rents, issues and profits from leases of all or any part of the Real Property Columbia, Maryland 6 or Improvements, all proceeds (including premium refunds) of each policy of insurance relating to the Real Property or Improvements, all proceeds from the taking of the Real Property or Improvements or any part thereof or any interest therein or right or estate appurtenant thereto by eminent domain or by purchase in lieu thereof, all amounts deposited in escrow for the payment of ad valorem taxes, assessments, charges, ground rentals and/or premiums for policies of insurance with respect to the Real Property or Improvements, all proceeds and other amounts paid or owing to Grantor under or pursuant to any and all contracts and bonds relating to the construction, erection or renovation of the Real Property or Improvements, all oil, gas and other hydrocarbons and other minerals produced from or allocated to the Real Property and all products processed or obtained therefrom, the proceeds thereof, and all accounts and general intangibles under which such proceeds may arise, together with any sums of money that may now or at any time hereafter become due and payable to Grantor by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of any kind or character arising under any and all present and future oil, gas and mining leases covering the Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL PROPERTY," which term expressly excludes any toxic waste or substance deemed hazardous under federal, regional, state or local laws, codes, ordinances, statutes, rules, regulations, decisions or orders). The Deed of Trust Property and the Fixtures and Personal Property are herein together referred to as the "PROPERTY". Except as otherwise expressly provided in this Deed of Trust, all terms in this Deed of Trust relating to the Property and the grant of the foregoing security interest which are defined in the Uniform Commercial Code of the State (the "UCC") shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the UCC, as those meanings may be amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the UCC have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the UCC in effect on the date of this Deed of Trust, then such term, as used herein, shall be given such broadened meaning. If the UCC shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the UCC in effect on the date of this Deed of Trust, such amendment or holding shall be disregarded in defining terms used in this Deed of Trust. Grantor hereby covenants and warrants with and to Lender that Grantor is indefeasibly seized of the Property and has good right, full power, and lawful authority to convey and encumber all of the same as aforesaid; that Grantor hereby fully warrants the title to the Property and will defend the same and the validity and priority of the lien and encumbrance of this Deed of Trust against the lawful claims of all persons whomsoever; and Grantor further warrants that the Property is free and clear of all liens and encumbrances of any kind, nature or description, save and except only (with respect to said Real Property, Improvements and Appurtenances) for real property taxes for years subsequent to 2004 (which are not yet due and Columbia, Maryland 7 payable) and those exceptions accepted by Lender as set forth in the title insurance commitment or proforma policy issued to Lender precedent to the issuance of a Lender's Policy of Title Insurance insuring the second lien priority of this Deed of Trust (the "PERMITTED EXCEPTIONS"). If Grantor shall pay to Lender the Loan guaranteed by the Grantor's Guaranty and if Grantor shall duly, promptly and fully perform, discharge, execute, effect, complete and comply with and abide by each and every one of the terms, covenants, conditions and agreements of the Grantor's Guaranty, this Deed of Trust, and all other Loan Documents, then this Deed of Trust and the estates and interests hereby granted and created shall cease, terminate and be null and void, and shall be discharged of record at the expense of Grantor. Grantor, for the benefit of Lender and its successors and assigns, does hereby expressly covenant and agree as follows: 1. PERFORMANCE OF GUARANTY. Grantor shall fulfill all of its obligations under the Grantor's Guaranty, together with all interest thereon, in accordance with the terms, covenants and conditions of the Grantor's Guaranty promptly at the times, at the place and in the manner that said principal and interest shall become due under the Grantor's Guaranty, and shall promptly and punctually pay all other sums required to be paid by Grantor pursuant to the terms, covenants and conditions of the Grantor's Guaranty, this Deed of Trust, the Indemnity Assignment of Leases, Rents and Profits of even date herewith (which Indemnity Assignment of Leases, Rents and Profits, as the same may be extended, renewed, replaced, amended, restated or otherwise modified, is hereinafter referred to as the "ASSIGNMENT"), and all other documents and instruments executed as further evidence of, as additional security for or executed in connection with the Loan evidenced by the Note, guaranteed by the Grantor's Guaranty and secured by this Deed of Trust (collectively, the "LOAN DOCUMENTS"). 2. PERFORMANCE OF OTHER OBLIGATIONS. Grantor shall perform, comply with and abide by, and cause Borrower to perform, comply with and abide by, each and every one of the terms, covenants, conditions and agreements contained and set forth in the Note, the Grantor's Guaranty, this Deed of Trust, and the other Loan Documents, shall comply with all Laws (hereafter defined) and shall perform all of its obligations under any term, covenant, condition, restriction or agreement of record affecting the Property, and to insure that at all times the Property constitutes one or more legal lots capable of being conveyed without violation of any subdivision or platting laws, codes, ordinances, statutes, rules, regulations, or other laws relating to the division, separation or subdivision of real property. Columbia, Maryland 8 3. PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY; HAZARDOUS WASTE. (a) Grantor shall keep all Improvements now existing or hereafter erected on the Real Property in good order and repair, only to be used for the Existing Use, and not to do or permit any waste, impairment or deterioration thereof or thereon, nor to alter, remove or demolish any of the Improvements or any Fixtures and Personal Property attached or appertaining thereto, without the prior written consent of Lender, nor to initiate, join in or consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the uses which may be made of the Property or any part thereof, nor to do or permit any other act whereby the Property shall become less valuable, be used for purposes contrary to applicable Law or be used in any manner which will increase the premium for or result in a termination or cancellation of the insurance policies hereinafter required to be kept and maintained on the Property. In furtherance of, and not by way of limitation upon, the foregoing covenant, Grantor shall effect such repairs as Lender may reasonably require, and from time to time make all needful and proper replacements so that the Improvements, Appurtenances, Fixtures and Personal Property will, at all times, be in good condition, fit and proper for the respective purposes for which they were originally erected or installed. In connection with the making of such repairs, Grantor shall use contractors who are properly licensed, who carry workers' compensation insurance and appropriate liability insurance, who generally have a good reputation for completing their work in a neat, prompt and workmanlike manner, and use only new or re-manufactured goods of a quality as good or better than that originally used on the Property. As provided herein, Grantor shall insure that no liens are filed against the Property that relate in any way to the repair work provided for herein. For so long as that certain Lease of the Property (the "BORDERS LEASE") dated November 14, 2002 between Grantor, as landlord, and Border's, Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with Borders as the tenant thereunder and Grantor is diligently enforcing the obligations of Borders thereunder, Grantor shall be deemed to be in compliance with the requirements of this subparagraph. Grantor at all times shall keep the Property and ground water of the Property free of Hazardous Materials (as hereinafter defined) to the extent required by applicable governmental agencies and free of any liens arising in connection therewith. Grantor shall not and shall not knowingly permit its tenants or any third party requiring the consent of Grantor to enter the Property, to use, generate, manufacture, treat, store, release, threaten release, transport on or over, emit or dispose of Hazardous Materials in, on, over, under or about the Property including the ground water of the Property in violation of any federal, regional, state or local law, code, ordinance, statute, rule, regulation, decision or order currently in existence or hereafter enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Grantor shall give Lender prompt Written Notice (as hereinafter defined) of any claim by any person, entity, or governmental agency that a significant release or disposal of Hazardous Materials has occurred in, on, over, under or about the Property, including the ground water of the Property, in Columbia, Maryland 9 excess of those permitted by the Hazardous Waste Laws, whether caused by the Grantor, any tenant or any third party. Grantor, through its professional engineers and at Grantor's sole cost, shall promptly and thoroughly investigate any suspected release of Hazardous Materials in, on, over, under or about the Property, including the ground water of the Property. Grantor shall forthwith remove, repair, remediate, clean up, and/or detoxify any Hazardous Materials found in, on, over, under or about the Property or in the ground water of the Property to the extent such actions are required by any applicable Hazardous Waste Laws, and whether or not Grantor was responsible for the existence of the Hazardous Materials in, on, over, under or about the Property or the ground water of the Property. "HAZARDOUS MATERIALS" shall include, but not be limited to, substances defined as "hazardous substances," "hazardous materials," or "toxic substances" under any Hazardous Waste Laws. (b) In addition,Grantor shall not incorporate any underground storage tanks into the Real Property without the prior written consent of Lender, and shall insure that all tanks currently on the Real Property comply with current Hazardous Waste Laws and underground storage tank regulations and are properly registered. Grantor hereby agrees to indemnify and defend Lender and Trustees and hold Lender and Trustees harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses, fines, fees, suits, actions, debts, obligations, and claims of any and every kind whatsoever, including Reasonable Attorneys' Fees (collectively, "LOSSES") paid, incurred or suffered by, or asserted against, Lender or Trustees for, with respect to, or as a direct or indirect result of, the presence in, on, over, under or about, or the escape, seepage, leakage, spillage, discharge, emission or release from, the Property of any Hazardous Materials (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Hazardous Waste Laws), regardless of the source of origination and whether or not caused by, or within the control of, Grantor and including any claims of lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(b) and similar provisions in this Deed of Trust and the other Loan Documents concerning Hazardous Materials shall survive repayment of the Note, the Grantor's Guaranty, and satisfaction of this Deed of Trust; provided, however, Grantor shall have no liability under this Section 3(b) regarding Hazardous Materials if either (i) the Property becomes contaminated subsequent to Lender's acquisition of the Property by foreclosure, acceptance by Lender of a deed in lieu thereof, or subsequent to any transfer of ownership of the Property which was approved or authorized by Lender in writing, pursuant to this Deed of Trust, provided that such transferee assumes in writing all of the obligations of Grantor with respect to Hazardous Materials pursuant to the Loan Documents, or (ii) at such time Grantor provides Lender with an environmental assessment report acceptable to Lender, in Lender's sole discretion, showing the Property to be free of Hazardous Materials and not in violation of any Hazardous Waste Laws. The burden of proof under this Section 3(b) with Columbia, Maryland 10 regard to establishing the date upon which any Hazardous Materials was released in, on, over, under or about the Property shall be upon Grantor. (c) Grantor at all times shall maintain the Property in full compliance with all federal, state, county, regional or local laws, codes, ordinances, rules, regulations, decisions and orders currently in existence or hereafter enacted or rendered, governing accessibility for the disabled, including but not limited to: The Architectural Barriers Act of 1968; The Rehabilitation Act of 1973; The Fair Housing Act of 1988; The Americans with Disabilities Act; and The Maryland Elimination of Architectural Barriers Act (collectively, the "ACCESSIBILITY LAWS"). Grantor hereby agrees to indemnify and defend Lender and hold Lender harmless from and against any and all Losses paid, incurred or suffered by, or asserted against Lender for, with respect to, or as a direct or indirect result of, the non-compliance of the Property with the Accessibility Laws whether or not caused by, or within the control of, Grantor, and including any claims of lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(c) and similar provisions in this Deed of Trust and the other Loan Documents concerning Accessibility Laws shall survive repayment of the Note and satisfaction of this Deed of Trust; provided, however, Grantor shall not be liable under this Section 3(c) for compliance with any Accessibility Laws if such Accessibility Laws first become effective, or such violations result from alterations or improvements to the Property that are performed subsequent to Lender's acquisition of the Property by foreclosure or acceptance of a deed in lieu thereof or subsequent to any transfer which was approved or authorized by Lender pursuant to this Deed of Trust, provided that such transferee assumes in writing all obligations pertaining to the Accessibility Laws pursuant to this Deed of Trust and the other Loan Documents. The burden of proof under this Section 3(c) with regard to establishing the date upon which such non-compliance with any Accessibility Laws occurred at the Property shall be upon Grantor. (d) Lender, and/or its agents, shall have the right and shall be permitted, subject to the rights of Borders under the Borders Lease, but shall not be required, at all reasonable times, to enter upon and inspect the Property to insure compliance with the foregoing covenants, and any and all other terms, covenants, conditions and agreements set forth in this Deed of Trust. 4. PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Grantor shall pay, or cause to be paid, all taxes, assessments and other charges as already levied or assessed, or that may be hereafter levied or assessed, upon or against the Property, when the same shall become due and payable according to Law, before delinquency, and before any interest or penalty shall attach thereto, and to deliver official receipts evidencing the Columbia, Maryland 11 payment of the same to Lender not later than thirty (30) days following the payment of the same. Grantor shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, the proposed assessment of ad valorem taxes or special assessments by governmental authorities having jurisdiction over the Property; provided, however, Grantor shall give Written Notice of its intent to bring such an action to Lender, and Lender may, in its sole discretion, require Grantor to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Deed of Trust) as a result of Grantor's act. 5. PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Grantor shall immediately pay and discharge from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, realtors, brokers and others which, if unpaid, might result in, or permit the creation of, a lien, charge or encumbrance upon the Property or any part thereof, or on the Rents, arising therefrom and, in general, to do or cause to be done everything necessary so that the lien of this Deed of Trust shall be fully preserved, at the sole cost of Grantor, without expense to Lender. Grantor shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, mechanics', materialmens' and other such liens filed against the Property; provided however, that Grantor shall give Written Notice to Lender of its intent to bring such action, and Lender may, in Lender's sole discretion, require Grantor to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Deed of Trust) as a result of Grantor's act. 6. PAYMENT OF JUNIOR ENCUMBRANCES. Grantor shall permit no default or delinquency under any other lien, imposition, charge or encumbrance against the Property, even though junior and inferior to the lien of this Deed of Trust; provided however, the foregoing shall not be construed to permit any such additional lien or encumbrance against the Property, other than the Permitted Exceptions. 7. PAYMENT OF MORTGAGE TAXES. Grantor shall pay any and all taxes which may be levied or assessed directly or indirectly upon the Note and/or this Deed of Trust (except for income taxes payable by Lender) or the Loan, without regard to any Law which may be hereafter enacted imposing payment of the whole or any part thereof upon Lender, its successors or assigns. Upon violation of this covenant, or upon the rendering by any court of competent jurisdiction of a decision that such a covenant by Grantor is legally inoperative, or if any court of competent jurisdiction shall render a decision that the rate of said tax when added to the rate of interest provided for in the Note exceeds the then maximum rate of interest allowed by Law, then, and in any such event, the debt hereby secured shall, at the option of Lender, its successors or assigns, become immediately due and payable, anything contained in this Deed of Trust or in the Grantor's Guaranty notwithstanding, without the imposition of a Prepayment Premium (as defined in the Note). The additional amounts which may become due and payable hereunder shall become a part of the Loan secured by this Deed of Trust. Columbia, Maryland 12 8. HAZARD INSURANCE. Grantor shall continuously, during the term of this Deed of Trust, keep the Improvements, Appurtenances, and Fixtures and Personal Property, now or hereafter existing, erected, installed and located in or upon the Real Property, insured with extended coverage insurance against loss or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine subsidence, acts of terrorism, and such other hazards, casualties, contingencies and perils including, without limitation, other risks insured against by persons operating like properties in the locality of the Property, or otherwise deemed necessary or advisable by Lender or any Rating Agency (as hereinafter defined), on such forms and with such deductibles as may be required by Lender or any Rating Agency, covering the Property in the amount of the full replacement cost thereof, (without taking into account any depreciation) less excavating and foundation costs, and covering all loss or abatement of rental or other income, without a provision for co-insurance, in an amount equal to the scheduled rental income of the Property for at least twelve (12) months, or if applicable, business interruption insurance in an amount sufficient to pay debt service on the Note, operating expenses, taxes and insurance on the Property for a period of twelve (12) months, and covering loss by flood (if the Property lies in a Special Flood Hazard Area as designated on the Department of Housing and Urban Development's Maps, or other flood prone designation) in an amount equal to the outstanding principal balance of the Loan or such other amount as approved by Lender, and earthquake insurance with a deductible amount of no more than ten percent (10%) of the policy amount if, in the judgment of Lender's inspecting architect, the Property lies in an area of anticipated significant seismic activity, and "Ordinance or Law Coverage" or "Enforcement" endorsements in amounts satisfactory to Lender if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses or the ability to rebuild the Improvements is restricted or prohibited, and comprehensive boiler and machinery insurance (without exclusion for explosion), if applicable, in amounts as shall be reasonably required by Lender or any Rating Agency and covering all boilers or other pressure vessels, machinery and equipment located at or about the Property (including, without limitation, electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping). All such insurance shall be carried with a company or companies licensed to do business in the State, which is acceptable to Lender, which company or companies shall have a rating at the time this Deed of Trust is executed equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Each such policy of insurance shall contain a noncontributing loss payable clause in favor of and in a form acceptable to Lender, and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, non-renew, cancel or terminate the policy or policies, or the expiration of such policies of insurance, or the exclusion of any individual risk such as acts of terrorism. If the insurance required under this Section 8 or any portion thereof is maintained pursuant to a blanket policy, Grantor shall furnish to Lender a certified copy of such policy, together with an original Evidence of Insurance Certificate (Acord Form 27) for Columbia, Maryland 13 hazard insurance indicating that Lender is an additional insured under such policy in regard to the Property and showing the amount of coverage apportioned to the Property, which coverage shall be in an amount sufficient to satisfy the requirements hereof. Not less than fifteen (15) days prior to the expiration dates of each policy required of Grantor hereunder, Grantor will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Deed of Trust or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Grantor, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. For so long as the Borders Lease remains in effect with Borders as the tenant thereunder, then to the extent that Borders self-insures to satisfy its insurance obligations under the Borders Lease, Lender shall accept such self-insurance as satisfying the obligation of Grantor to provide insurance under this Section 8, provided that (i) Borders, or the guarantor of the Borders Lease, Boarders Group, Inc., maintains a minimum net worth of not less than Two Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance otherwise satisfies the requirements of this Section 8 as to the amount required to be maintained by Borders, and (iii) Grantor provides to Lender written verification of such coverage in form and substance reasonably acceptable to Lender. Notwithstanding the foregoing, Lender shall have the right require Grantor to maintain in effect a separate policy of liability insurance with respect to the Property meeting the requirements of Section 9 of this Deed of Trust. In the event of loss covered by insurance maintained by Grantor with respect to the Property, including, without limitation, insurance covering hazards, casualties, contingencies and perils for which insurance has been required by Lender hereunder, Grantor shall give immediate notice thereof to Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an interest for Lender to, at its option, make proof of loss and/or to file a claim thereunder. Each insurance company concerned is hereby notified, authorized and directed to make payment for such loss directly to Lender, instead of to Grantor and Lender jointly, and Grantor hereby authorizes Lender to adjust and compromise any losses for which insurance proceeds are payable under any of the aforesaid insurance policies and, after deducting the costs of collection, to apply the proceeds of such insurance, at its option either: (a) to the restoration or repair of the insured Improvements, Appurtenances, and Fixtures and Personal Property, provided that, in the opinion and sole discretion of Lender, such restoration or repair is reasonably practical and, provided further, that, in the opinion and sole discretion of Lender, either: (i) the insurance proceeds so collected are sufficient to cover the cost of such restoration or repair of the damage or destruction with respect to which such proceeds were paid, or (ii) the insurance proceeds so collected are not sufficient alone to cover the cost of such restoration or repair, but are sufficient therefor when taken together with funds provided and made available by Grantor from other sources; in which event Lender shall make such insurance proceeds available to Grantor for the purpose of effecting such restoration or repair; Columbia, Maryland 14 but Lender shall not be obligated to see to the proper application of such insurance proceeds nor shall the amount of funds so released or used be deemed to be payment of or on account of the Loan; or (b) to the reduction of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured, in which event such proceeds shall be applied at par against the Loan and the monthly payment due on account of such Loan shall be reduced accordingly as calculated by Lender. None of such actions taken by Lender shall be deemed to be or result in a waiver or impairment of any equity, lien or right of Lender under and by virtue of this Deed of Trust, nor will the application of such insurance proceeds to the reduction of the Loan serve to cure any default in the payment thereof. In the event of foreclosure of this Deed of Trust or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Grantor in and to any insurance policies then in force including any rights to unearned premiums and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Grantor's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Grantor's sole expense. Notwithstanding anything set forth in this Section 8 to the contrary, in the event of loss or damage to the Property by fire or other casualty covered by insurance maintained by Grantor with respect to the Property, including, without limitation, insurance which has been required by Lender hereunder and provided by Grantor, and the amount of such loss or damage does not exceed twenty-five percent (25%) of the unpaid principal balance of the Note, Lender hereby agrees to allow the proceeds of insurance to be used for the restoration of the Property and to release such insurance proceeds to Grantor as such restoration progresses, provided: (a) Neither Grantor nor Borrower is in default under any of the terms, covenants and conditions of this Deed of Trust, the Grantor's Guaranty, the Note or any of the other Loan Documents; (b) The Improvements, after such restoration, shall be at least eighty percent (80%) leased pursuant to leases approved in writing by Lender; (c) The plans and specifications for the restoration of the Property are approved in writing by Lender in advance; (d) At all times during such restoration,Grantor has deposited with Lender funds which, when added to the insurance proceeds received by Lender, are sufficient to complete the restoration of the Property in accordance with the approved plans and specifications, and all applicable building codes, zoning ordinances, regulations and Columbia, Maryland 15 Accessibility Laws, and further, that the funds retained by Lender are sufficient to complete the restoration of the Property as certified to Lender by Lender's inspecting architect/engineer; (e) Grantor provides suitable completion, payment and performance bonds, builders' all risk insurance, and all necessary licenses and permits for such restoration in form and amount acceptable to Lender; (f) The insurer under such policies of fire or other casualty insurance does not assert any defense to payment under such policies against Lender, Grantor, any tenant, or third party of Grantor with regard to the Property; (g) Lender shall have the option, upon the completion of such restoration of the Property, to apply any surplus insurance proceeds remaining after the completion of such restoration, at par, to the reduction of the outstanding principal balance of the Note; notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured; (h) The funds held by Lender shall be disbursed no more often than once per month and in not more than five (5) increments of not less than Fifty Thousand Dollars ($50,000) each, except the final disbursement of such funds which may be in an amount less than Fifty Thousand Dollars ($50,000); (i) Lender's obligation to make any such disbursement shall be conditioned upon Lender's receipt of written certification from Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender by Grantor) that all construction and work for which such disbursement is requested has been completed in accordance with the approved plans and specifications and in accordance with all applicable building codes, zoning ordinances and all other Laws and, further, that Grantor has deposited with Lender sufficient funds to complete such restoration in accordance with Section 8(d); (j) In the reasonable judgment of the Lender, the Property can be restored within six months after insurance proceeds are made available and at least six months prior to the Maturity Date (as defined in the Note) to an economic unit not less valuable (including an assessment by Lender of the impact of the termination of any Occupancy Leases due to such casualty) and not less useful than the same was prior to the casualty, and after such restoration will adequately secure the outstanding balance of the Loan; and (k) Lender shall be entitled to require and to impose such other conditions to the release of such funds as would be customarily or reasonably be required and imposed by institutional mortgage lenders for a project of similar nature and cost. Columbia, Maryland 16 In the event of a casualty, provided that Grantor is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 8 to the contrary, Lender shall make insurance proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. 9. LIABILITY INSURANCE. Grantor shall carry and maintain such commercial general liability insurance as may from time to time be required by Lender or any Rating Agency, taking into consideration the type of property being insured and the corresponding liability exposure, on forms, with deductibles, in amounts and with such company or companies licensed to do business in the State and as may be acceptable to Lender. All such commercial general liability insurance shall be carried with a company or companies which have and maintain a rating equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and all renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with a Certificate of Insurance (Acord Form 25S) and receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Such policy or policies of insurance shall name Lender as an additional insured and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, cancel, non-renew, or terminate the policy or policies or the expiration of such policy or policies of insurance, or the exclusion of any individual risk such as acts of terrorism. Not less than fifteen (15) days prior to the expiration dates of each policy or policies required of Grantor hereunder, Grantor will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Deed of Trust or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Grantor, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Grantor's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Grantor's sole expense. 10. COMPLIANCE WITH LAWS. (a) Grantor shall observe, abide by and comply with all federal, regional, state and local laws, codes, ordinances, statutes, rules, regulations, decisions, orders, requirements or decrees relating to the Property enacted, promulgated or issued by any federal, state, county or local governmental or quasi-governmental authority or any agency or subdivision thereof having jurisdiction over Grantor or the Property, which now or hereafter affect Grantor or the Property, including Hazardous Waste Laws and Accessibility Laws (collectively, the "LAWS"), and to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning, variances, special exceptions and nonconforming uses), privileges, Columbia, Maryland 17 franchises and concessions which are applicable to the Property, or which have been granted to or contracted for by Grantor in connection with any existing, presently contemplated or future uses of the Property. (b) Grantor shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Grantor's Guaranty, this Deed of Trust and the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Grantor shall deliver to Lender such certifications or other evidence from time to time throughout the term of this Deed of Trust, as requested by Lender in its sole discretion, that (i) Grantor is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Grantor is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true: (1) Equity interests in Grantor are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of each outstanding class of equity interests in Grantor are held by "benefit plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Grantor qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. 11. MAINTENANCE OF PERMITS. Grantor shall obtain, keep and constantly maintain in full force and effect during the entire term of this Deed of Trust, all certificates, licenses and permits necessary to keep the Property operating for the Existing Use and, except as specifically provided for in this Deed of Trust, not to assign, transfer or in any manner change such certificates, licenses or permits without first receiving the written consent of Lender. 12. OBLIGATIONS OF GRANTOR AS LESSOR. (a) Grantor shall perform every obligation of Grantor (as the landlord) and enforce every obligation of the tenant in any and every lease, license or other occupancy agreement of or affecting the Property or any part thereof (the "OCCUPANCY LEASES"), and not to modify, alter, waive or cancel any such Occupancy Leases or any part thereof or rights thereunder, without the prior written consent of Lender (but such consent shall not be required for such action as to Occupancy Leases of three thousand (3,000) square feet or less if such Columbia, Maryland 18 action is in the ordinary course of business of owning and operating the Property in a prudent and business-like manner, on then current market terms), nor collect for more than thirty (30) days in advance of the date due any Rents that may be collectible under any such Occupancy Leases and, except as provided for in this Deed of Trust, not to assign any such Occupancy Lease(s) or any such Rents relating thereto, to any party other than Lender, without the prior written consent of Lender. Grantor will notify Lender in writing of any default under any Occupancy Lease. In the event of default under any such Occupancy Lease by reason of failure of Grantor to keep or perform one or more of the covenants, agreements or conditions thereof, Lender is hereby authorized and empowered, and may, at its sole option, remedy, remove or cure any such default, and further, Lender may, at its sole option and in its sole discretion but without obligation to do so, pay any sum of money deemed necessary by Lender for the performance of said covenants, agreements and conditions, or for the curing or removal of any such default, and incur all expenses and obligations which Lender may consider necessary or reasonable in connection therewith, and Grantor shall repay on demand all such sums so paid or advanced by Lender together with interest thereon until paid at the lesser of either: (i) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (ii) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; all of such sums, if unpaid, shall be added to and become part of the Loan. (b) All such Occupancy Leases hereafter made shall be subject to the approval of Lender and: (i) shall be at competitive market rental rates then prevailing in the geographic area for projects used for the Existing Use comparable to the Property; (ii) shall have lease terms of not less than three years; and (iii) at Lender's option, shall be superior or subordinate in all respects to the lien of this Deed of Trust. Provided, however, that Lender shall not require approval in advance of any Occupancy Leases which conform to the Grantor's Form Lease (as hereinafter defined) as previously approved by Lender, except as set forth below. Neither the right nor the exercise of the right herein granted unto Lender to keep or perform any such covenants, agreements or conditions as aforesaid shall preclude Lender from exercising its option to cause the whole Loan to become immediately due and payable by reason of Grantor's default in keeping or performing any such covenants, agreements or conditions. (c) Lender has approved a form of Occupancy Lease to be used by Grantor in connection with the Property (the "FORM LEASE"). Grantor shall not, without the prior written consent of Lender, modify or alter the Form Lease in any material respect. In addition, Grantor shall not, without the prior written consent of Lender, surrender, terminate, modify or alter, either orally or in writing, any Occupancy Lease now existing or hereafter made with any Major Tenant (as hereinafter defined) for all or part of the Property, permit an assignment or sublease of any such Occupancy Lease, or request or consent to the subordination of any Occupancy Lease to any lien subordinate to this Deed of Trust. Grantor shall furnish Lender with copies of all executed Occupancy Leases of all or any part of the Columbia, Maryland 19 Property now existing or hereafter made, and Grantor shall assign to Lender (which assignment shall be in form and content acceptable to Lender), as additional security for the Grantor's Guaranty and the Loan, all Occupancy Leases now existing or hereafter made for all or any part of the Property. (d) Notwithstanding the foregoing approval by Lender of Grantor's Form Lease, Lender hereby specifically reserves the right to approve all prospective tenants under all Occupancy Leases hereafter proposed to be made if either: (i) the term thereof, excluding options to renew the same, exceeds five years; or (ii) the net rentable area to be occupied thereunder, including expansion options, exceeds ten percent (10%) of the net leasable area of each of the buildings comprising the Improvements (the tenants under such leases being hereinafter referred to as "MAJOR TENANTS"). Grantor shall notify Lender in writing of all prospective Major Tenants, and shall deliver to Lender, at Grantor's sole cost and expense, a copy of the prospective Major Tenant's current financial statement and the most recent Dun & Bradstreet credit report on said prospective Major Tenant. The financial statement delivered to Lender hereunder shall be certified as true and correct by the Major Tenant, or, if available, by a certified public accountant. (e) In no event shall Grantor exercise any right to relocate any tenant outside the Property pursuant to any right set forth in an Occupancy Lease without the prior written consent of Lender. 13. MAINTENANCE OF PARKING & ACCESS; PROHIBITION AGAINST ALTERATION; SEPARATE TAX LOT. (a) Grantor shall construct, keep and constantly maintain, as the case may be, all curbs, drives, parking areas and the number of parking spaces heretofore approved by Lender, or heretofore or hereafter required by any Laws or any governmental body, agency or authority having jurisdiction over Grantor or the Property, and as required by the terms of the Occupancy Leases, and not to alter, erect, build or construct upon any portion of the Property, any building, structure or improvement of any kind whatsoever, the erection, building or construction of which has not been previously approved by Lender in writing, which approval shall be at the sole discretion of Lender. (b) Grantor shall cause the Property to remain separately assessed for real estate tax purposes as a separate tax lot or lots. 14. EXECUTION OF ADDITIONAL DOCUMENTS. Grantor shall do, make, execute, acknowledge, witness and deliver all deeds, conveyances, mortgages, deeds of trust, assignments, estoppel certificates, subordination non-disturbance and attornments, notices of assignments, transfers, assurances, security agreements, financing statements and renewals thereof, and all other instruments or other acts necessary, as Lender shall from time to time Columbia, Maryland 20 require for the purpose of better assuring, conveying, assigning, transferring, securing and confirming unto Lender the Property and rights hereby encumbered, created, conveyed, assigned or intended now or hereafter so to be encumbered, created, conveyed or assigned, or which Grantor may now be or may hereafter become bound to encumber, create, convey or assign to Lender, or for the purpose of carrying out the intention or facilitating the performance of the terms of this Deed of Trust, or for filing, registering or recording this Deed of Trust, and to pay all filing, registration or recording fees and all taxes, costs and other expenses, including Reasonable Attorneys' Fees, incident to the preparation, execution, acknowledgment, delivery and recordation of any of the same. By signing this Deed of Trust, Grantor authorizes Lender to file such financing statements, with or without the signature of Grantor, as Lender may elect, as may be necessary or desirable to perfect the lien of Lender's security interest in the Fixtures and Personal Property. Without limiting any other provision herein, Grantor hereby authorizes Lender to file one or more financing statements and any renewal or continuation statements thereof, describing the Property and the proceeds of the Property, including, without limitation, a financing statement covering "all assets of Grantor all proceeds therefrom, and all rights and privileges with respect thereto." Grantor further authorizes Lender to file, with or without any additional signature from Grantor, as Lender may elect, such amendments and continuation statements as Lender may deem necessary or desirable from time to time to perfect or continue the lien of Lender's security interest in the Fixtures and Personal Property. Grantor hereby ratifies any financing statements that may have been filed by Lender in advance of the date hereof to perfect Lender's security interest in the Fixtures and Personal Property. 15. AFTER-ACQUIRED PROPERTY SECURED. Grantor shall subject to the lien of this Deed of Trust all right, title and interest of Grantor in and to all extensions, improvements, betterments, renewals, substitutions and replacements of, and all additions and appurtenances to, the Property hereinabove described, hereafter acquired by or released to Grantor, or constructed, assembled or placed by Grantor on the Real Property, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, encumbrance, conveyance, assignment or other act by Grantor, as fully, completely and with the same effect as though now owned by Grantor and specifically described herein, but at any and all times, Grantor will execute and deliver to Lender any and all such further assurances, mortgages, deeds of trust, conveyances, security agreements, financing statements or assignments thereof or security interests therein as Lender may reasonably require for the purpose of expressly and specifically subjecting the same to the lien of this Deed of Trust. 16. PAYMENTS BY LENDER ON BEHALF OF GRANTOR. Grantor shall make payment of any taxes, assessments or public charges on or with respect to the Property before the same shall become delinquent, or to make payment of any insurance premiums or other charges, impositions, or liens herein or elsewhere required to be paid by Grantor, or if Columbia, Maryland 21 Grantor shall fail so to do, then Lender, at its sole option, but without obligation to do so, may make payment or payments of the same and also may redeem the Property from tax sale without any obligation to inquire into the validity of such taxes, assessments, charges, impositions or liens. In the case of any such payment by Lender, Grantor agrees to reimburse Lender, upon demand therefor, the amount of such payment and of any fees and expenses attendant in making the same, together with interest thereon at the lesser of either: (a) the highest rate of interest then allowed by the Laws of the State or, if controlling, the Laws of the United States, or (b) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; and until paid such amounts and interest shall be added to and become part of the Loan to the same extent that this Deed of Trust secures the repayment of the Loan. In making payments authorized by the provisions of this Section 16, Lender may do so whenever, in Lender's sole judgment and discretion, such advance or advances are necessary or desirable to protect the full security intended to be afforded by this Deed of Trust. Neither the right nor the exercise of the rights herein granted to Lender to make any such payments as aforesaid shall preclude Lender from exercising its option to cause the Loan to become immediately due and payable by reason of Grantor's default in making such payments as hereinabove required. 17. FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this Deed of Trust, Grantor shall deposit with Lender, together with and in addition to each monthly payment due on account of the Loan, an amount equal to one-twelfth (1/12th) of the annual total of such taxes, assessments, insurance premiums and other charges (all as estimated by Lender in its sole discretion) so that, at least thirty (30) days prior to the due date thereof, Lender shall be able to pay in full all such taxes, assessments, insurance premiums and other charges as the same shall become due. Lender may hold the sums so deposited without paying interest, commingle same with its general funds and/or apply the same to the payment of said taxes, assessments, insurance premiums or other charges as they become due and payable. If at any time the funds so held by Lender are insufficient to pay such taxes, assessments, insurance premiums or other charges as they become due and payable, Grantor shall immediately, upon Written Notice and demand by Lender, deposit with Lender the amount of such deficiency. The failure on the part of Grantor to do so shall entitle Lender, at Lender's sole option, to make such payments in accordance with the rights and pursuant to the conditions elsewhere provided in this Deed of Trust. Grantor hereby grants to Lender a security interest in all funds deposited with Lender, and such funds are hereby pledged by Grantor to Lender for the purpose of securing all indebtedness and obligations secured by this Deed of Trust. Whenever any default exists under this Deed of Trust, Lender may, at Lender's sole option but without an obligation so to do, apply any funds so held by Lender pursuant to this Section 17 toward the payment of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured, in such order and manner of application as Lender may elect. Columbia, Maryland 22 18. CONDEMNATION; EMINENT DOMAIN. All claims and rights of action for, and all awards and other compensation heretofore or hereafter made to Grantor and all subsequent owners of the Property in any taking by eminent domain, recovery for inverse condemnation or by deed in lieu thereof, whether permanent or temporary, of all or any part of the Property or any easement or any appurtenance thereto, including severance and consequential damages and change in grade of any way, street, avenue, road, alley, passage or public place, are hereby assigned to Lender. Grantor hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, and authorizes, directs and empowers Lender, at the option of Lender as said attorney-in-fact, on behalf of Grantor, its successors and assigns, to adjust or compromise the claim for any such award, and alone to collect and receive the proceeds thereof, to give proper receipts and acquittances therefor and, after deducting any expenses of collection, Lender shall at its sole option either: (a) apply the net proceeds as a credit upon any portion of the Loan, as selected by Lender, notwithstanding the fact that the amount owing thereon may not then be due and payable, or that the Loan is otherwise adequately secured. In the event Lender applies such awards to the reduction of the outstanding Loan guaranteed by the Grantor's Guaranty, such proceeds shall be applied at par, and the monthly installments due and payable under the Note shall be reduced accordingly as calculated by Lender; however no such application shall serve to cure an existing default in the payment of the Note or the Grantor's Guaranty; or (b) hold said proceeds without any allowance of interest, and make the same available for restoration or rebuilding of the Improvements. In the event that Lender makes said proceeds available to reimburse Grantor for the cost of the restoration or rebuilding of the Improvements on the Real Property, such proceeds shall be made available in the manner and under the same conditions as required under Section 8 hereof. If the proceeds are made available by Lender to reimburse Grantor for the cost of said restoration or rebuilding, any surplus which may remain out of said award after payment of such cost of restoration or rebuilding, shall be applied on account of the Loan at par notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured. In the event of a taking or condemnation, provided that Grantor is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 19 to the contrary, Lender shall make condemnation proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. Grantor further covenants and agrees to give Lender immediate notice of the actual or threatened commencement of any proceedings under eminent domain, and to deliver to Lender copies of any and all papers served in connection with any such proceedings. Grantor further covenants and agrees to make, execute and deliver to Lender, at any time or times, upon Columbia, Maryland 23 request, free, clear and discharged of any encumbrance of any kind whatsoever, any and all further assignments and/or other instruments deemed necessary by Lender for the purpose of validly and sufficiently assigning all such awards and other compensation heretofore or hereafter made to Lender (including the assignment of any award from the United States government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for payment thereof). It shall be a default hereunder if either: (i) any part of any of the Improvements situated on the Real Property shall be condemned by any governmental authority having jurisdiction; or (ii) lands constituting a portion of the Real Property shall be condemned by any governmental authority having jurisdiction, such that the remaining Property is in violation of applicable parking, zoning, platting, or other ordinances, or fails to comply with the terms of the Occupancy Leases with Major Tenants. In either of said events, Lender shall be entitled to exercise any or all remedies provided or referenced in this Deed of Trust or the other Loan Documents, including the application of condemnation proceeds to the outstanding principal balance of the Note at par, and the right to accelerate the maturity date of the Note and require payment in full without the imposition of a Prepayment Premium. 19. COSTS OF COLLECTION. In the event that the Note or the Grantor's Guaranty is placed in the hands of an attorney for collection, or in the event that Lender shall become a party either as plaintiff or as defendant, in any action, suit, appeal or legal proceeding (including, without limitation, foreclosure, condemnation, bankruptcy, administrative proceedings or any proceeding wherein proof of claim is by law required to be filed), hearing, motion or application before any court or administrative body in relation to the Property or the lien and security interest granted or created hereby or herein, or for the recovery or protection of the Loan or the Property, or for the foreclosure of this Deed of Trust, or for the enforcement of the terms and conditions of the Loan Documents, Grantor shall indemnify, save, defend and hold Lender harmless from and against any and all Losses incurred by Lender on account thereof, and Grantor shall repay, on demand, all such Losses, together with interest thereon until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums, if unpaid, shall be added to and become a part of the Loan. 20. DEFAULT RATE. Any sums not paid when due, whether maturing by lapse of time or by reason of acceleration under the provisions of the Note, the Grantor's Guaranty, this Deed of Trust, or any of the other Loan Documents, and whether principal, interest or money owing for advancements pursuant to the terms of this Deed of Trust or any other Loan Document, shall bear interest until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums shall be added to and become a part of the Loan. Columbia, Maryland 24 21. SAVINGS CLAUSE. Notwithstanding any provisions in the Note, the Grantor's Guaranty, or in this Deed of Trust to the contrary, the total liability for payments in the nature of interest, including but not limited to Prepayment Premiums, default interest and late payment charges, shall not exceed the limits imposed by the Laws of the State or, if controlling, the Laws of the United States, relating to maximum allowable charges of interest. Lender shall not be entitled to receive, collect or apply, as interest on the Loan, any amount in excess of the maximum lawful rate of interest permitted to be charged by any Laws. In the event Lender ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be applied to reduce the unpaid principal balance of the Loan evidenced by the Note and guaranteed by the Grantor's Guaranty. If the unpaid principal balance of such Loan has been paid in full, any remaining excess shall be forthwith returned to Grantor. 22. BANKRUPTCY, REORGANIZATION OR ASSIGNMENT. (a) It shall be a default hereunder if Borrower or Grantor or any general partner or managing member of Borrower or Grantor shall: (a) elect to dissolve or liquidate its business organization or wind up its business affairs without receiving the prior written approval of Lender; (b) consent to the appointment of a receiver, trustee or liquidator of all or a substantial part of its assets; (c) be adjudicated as bankrupt or insolvent, or file a voluntary petition in bankruptcy, or admit in writing its inability to pay its debts as they become due; (d) make a general assignment for the benefit of creditors; (e) file a petition under or take advantage of any insolvency law; (f) file an answer admitting the material allegations of a petition filed against Borrower or Grantor or any general partner or managing member of Borrower or Grantor in any bankruptcy, reorganization or insolvency proceeding, or fail to cause the dismissal of such petition within thirty (30) days after the filing of said petition; (g) take action for the purpose of effecting any of the foregoing; or (h) if any order, judgment or decree shall be entered upon an application of a creditor of Borrower or Grantor or any general partner or managing member of Borrower or Grantor by a court of competent jurisdiction approving a petition seeking appointment of a receiver or trustee of all or a substantial part of Borrower's or Grantor's assets or any of Borrower's or Grantor's general partner's or managing member's assets and such order, judgment or decree shall continue unstayed and in effect for a period of thirty (30) days. (b) Grantor covenants and agrees that it has not and shall not: (i) engage in any business or activity other than the acquisition, ownership, operation and maintenance of the Property, and activities incidental thereto; (ii) acquire or own any material asset other than (1) the Property, and (2) such incidental Fixtures and Personal Property as may be necessary for the operation of the Property; Columbia, Maryland 25 (iii) merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent; (iv) fail to preserve its existence as an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Grantor's Governing Documents (as hereafter defined); (v) own any subsidiary or make any investment in or acquire the obligations or securities of any other person or entity without the consent of Lender; (vi) commingle its assets with the assets of any of its partner, members, shareholders, affiliates, or of any other person or entity or transfer any assets to any such person or entity other than distributions on account of equity interests in the Grantor permitted hereunder and properly accounted for; (vii) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation, other than the Loan and the Affiliate Loans), other than the Loan, except unsecured trade and operational debt incurred with trade creditors in the ordinary course of its business of owning and operating the Property in such amounts as are normal and reasonable under the circumstances, provided that such debt is not evidenced by a note and is paid when due and provided in any event the outstanding principal balance of such debt shall not exceed at any one time 1% of the outstanding Loan. Grantor shall not be deemed in default of the foregoing restrictions by virtue of any guaranty delivered by Grantor with respect to the Affiliate Loans; (viii) allow any person or entity to pay its debts and liabilities (except the Borrower or a Guarantor - or in connection with the cross-default and cross collateralization of the Affiliate Loans) or fail to pay its debts and liabilities solely from its own assets; (ix) fail to maintain its records, books of account and bank accounts separate and apart from those of the shareholders, partners, members, principals and affiliates of Grantor, the affiliates of a shareholder, partner or member of Grantor, and any other person or entity or fail to prepare and maintain its own financial statements in accordance with generally accepted accounting principles and susceptible to audit, or if such financial statements are consolidated fail to cause such financial statements to contain footnotes disclosing that the Property is actually owned by the Grantor; Columbia, Maryland 26 (x) enter into any contract or agreement with any shareholder, partner, member, principal or affiliate of Grantor, any guarantor of all or a portion of the Loan (a "GUARANTOR") or any shareholder, partner, member, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any shareholder, partner, member, principal or affiliate of Grantor or Guarantor, or any shareholder, partner, member, principal or affiliate thereof; (xi) seek dissolution or winding up, in whole or in part; (xii) fail to correct any known misunderstandings regarding the separate identity of Grantor; (xiii) hold itself out to be responsible or pledge its assets or credit worthiness for the debts of another person or entity or allow any person or entity to hold itself out to be responsible or pledge its assets or credit worthiness for the debts of the Grantor (except for a Guarantor); (xiv) make any Loan or advances to any third party, including any shareholder, partner, member, principal or affiliate of Grantor, or any shareholder, partner, member, principal or affiliate thereof, except as may be required in connection with the cross default and cross collateralization of the Affiliate Loans; (xv) fail to file its own tax returns, if required under applicable law, or to use separate contracts, purchase orders, stationary, invoices and checks, except that Grantor may file a consolidated tax return with Agree Limited Partnership for reporting purposes; (xvi) fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (1) to mislead others as to the entity with which such other party is transacting business, or (2) to suggest that Grantor is responsible for the debts of any third party (including any shareholder, partner, member, principal or affiliate of Grantor, or any shareholder, partner, member, principal or affiliate thereof); (xvii) fail to allocate fairly and reasonably among Grantor and any third party (including, without limitation, any Guarantor) any overhead for common employees, shared office space or other overhead and administrative expenses; (xviii) allow any person or entity to pay the salaries of its own employees or fail to maintain a sufficient number of employees for its contemplated business operations; Columbia, Maryland 27 (xix) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xx) share any common logo with or hold itself out as or be considered as a department or division of (1) any shareholder, partner, principal, member or affiliate of Grantor, (2) any affiliate of a shareholder, partner, principal, member or affiliate of Grantor, or (3) any other person or entity or allow any person or entity to identify the Grantor as a department or division of that person or entity; or (xxi) conceal assets from any creditor, or enter into any transaction with the intent to hinder, delay or defraud creditors of the Grantor or the creditors of any other person or entity. 23. TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It is understood by Grantor that time is of the essence hereof in connection with all obligations of Grantor herein, in the Grantor's Guaranty, the Assignment, and any of the other Loan Documents. Lender, at its sole option, may declare the Loan, as well as all other monies secured or evidenced hereby or by any of the other Loan Documents, including, without limitation, all Prepayment Premiums (to the extent permitted by the Laws of the State) and late payment charges, to be in default and forthwith due and payable, in the event: (1) Borrower or Grantor defaults in the payment of any monthly installment of the Note or the Grantor's Guaranty, whether of principal or interest, or both, or in the payment of any other sums of money referred to herein or in the Note, Grantor's Guaranty, or in any of the other Loan Documents, or in any of the documents evidencing, guarantying, or securing the repayment of the Affiliate Loans, including, but not limited to, that certain Indemnity Deed of Trust and Security Agreement executed by the Grantor as a second priority lien on the Deed of Trust Property to secure its cross-default guaranty of the Affiliate Loans (collectively, the "AFFILIATE LOAN DOCUMENTS"), promptly and fully when the same shall be due, without notice or demand from Lender to Grantor in regard to such Monetary Default (as hereinafter defined), and any such Monetary Default remains uncured for a period of five (5) days after Written Notice thereof has been given by Lender to Grantor, unless Lender has previously given Grantor such Written Notice for a failure to pay in the then-current Loan Year (as defined in the Note), in which event no such notice need be given and no right to cure need be afforded Grantor as to any further Monetary Default during such Loan Year. Columbia, Maryland 28 (2) Borrower or Grantor breaches or defaults on any of the terms, covenants, conditions and agreements of the Note, the Grantor's Guaranty, this Deed of Trust, or any other Loan Documents or any of the Affiliate Loan Documents; or in the event that each and every one of said terms, covenants, conditions and agreements is not otherwise either duly, promptly and fully discharged or performed, and any such Non-Monetary Default (as hereinafter defined) remains uncured for a period of thirty (30) days after Written Notice thereof has been delivered from Lender to Grantor; unless such Non-Monetary Default cannot be cured within said thirty (30) day period, in which event Borrower or Grantor shall have a reasonable period of time to complete cure, provided that action to cure such Non-Monetary Default is promptly commenced within said thirty (30) day period, and Grantor is, in Lender's sole judgment, not diminishing or impairing the value of the Property, and is diligently pursuing a cure to completion, but in no event longer than ninety (90) days. (3) Any representation or warranty of Borrower or Grantor or their respective members, general partners, principals, affiliates, agents or employees, or of any Guarantor made herein or in or in any other Loan Document or any of the Affiliate Loan Documents, in any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made. (4) Any seizure or forfeiture of the Property, or any portion thereof, or Grantor's interest therein, resulting from criminal wrongdoing or other unlawful action of Grantor, its affiliates, or any tenant in the Property under any federal, state or local law. (5) If Grantor consummates a transaction which would cause this Deed of Trust or Lender's exercise of its rights under this Deed of Trust, the Note, the Grantor's Guaranty, or the other Loan Documents to constitute a nonexempt prohibited transaction under ERISA or result in a violation of a state statute regulating governmental plans, subjecting Lender to liability for a violation of ERISA or a state statute. (6) Any default occurs in the performance of any covenant or obligation of Borrower or Grantor or any other party under any indemnity or guaranty delivered to Lender in connection with the Loan and such default continues beyond the expiration of applicable notice and cure periods. (7) Any default occurs under the Affiliate Loans which default continues beyond the expiration of applicable notice and cure periods. Columbia, Maryland 29 Upon the occurrence of any one of the above events, and at the option of Lender, the principal of and the interest accrued on the Loan and all other sums secured by this Deed of Trust and the other Loan Documents shall immediately become due and payable as if all of said sums of money were originally stipulated to be paid on such day. In addition, Lender may avail itself of all rights and remedies provided by law or equity, and may foreclose or prosecute a suit at law or in equity as if all monies secured hereby had matured prior to its institution, anything in this Deed of Trust or any of the other Loan Documents to the contrary notwithstanding. Lender shall have no obligation to give Grantor notice of, or any period to cure, any Monetary Default or any Incurable Default (as hereinafter defined) prior to exercising its rights, powers, privileges and remedies. As used herein, the term "MONETARY DEFAULT" shall mean any default which can be cured by the payment of money such as, but not limited to, the payment of principal and interest due under the Note and Grantor's Guaranty, or the payment of taxes, assessments and insurance premiums when due as provided in this Deed of Trust. As used herein, the term "NON-MONETARY DEFAULT" shall mean any default that is not a Monetary Default or an Incurable Default. As used herein, the term "INCURABLE DEFAULT" shall mean either: (i) any voluntary or involuntary sale, assignment, mortgaging, encumbering or transfer in violation of the covenants contained herein or any of the other Loan Documents; or (ii) if Borrower or Grantor, or any person or entity comprising Borrower or Grantor or any guarantor or indemnitor of the Loan, should breach any of the provisions of Section 22. 24. FORECLOSURE. Upon the occurrence of a default hereunder, Lender may institute an action to foreclose this Deed of Trust as to the amount so declared due and payable, and thereupon the Property (or any portion thereof) shall be sold according to law to satisfy and pay the same, together with all costs, expenses and allowances thereof, including, without limitation, Reasonable Attorneys' Fees. The Property may be sold in one parcel, several parcels or groups of parcels, and Lender shall be entitled to bid at the sale, and, if Lender is the highest bidder for the Property or any part or parts thereof, Lender shall be entitled to purchase the same. The failure or omission on the part of Lender to exercise the option for acceleration of maturity of the Note and foreclosure of this Deed of Trust following any default as aforesaid or to exercise any other option or remedy granted hereunder to Lender when entitled to do so in any one or more instances, or the acceptance by Lender of partial payment of the Loan, whether before or subsequent to Grantor's default hereunder, shall not constitute a waiver of any such default or the right to exercise any such option or remedy, but such option or remedy shall remain continuously in force. Acceleration of the maturity of the Note, once claimed hereunder by Lender, at the option of Lender, may be rescinded by written acknowledgment to that effect by Lender, but the tender and acceptance of partial payments alone shall not in any way either affect or rescind such acceleration of maturity, nor act as a waiver, accord and satisfaction, modification, novation or similar defense. Columbia, Maryland 30 25. UCC REMEDIES. (a) This Deed of Trust constitutes a Security Agreement under the UCC with respect to any part of the Property that may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate, 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: (1) No financing statement covering any of the Property or any proceeds thereof is on file in any public office; and Borrower will, at its cost and expense, upon demand, furnish to Lender such further information and will execute and deliver to Lender such financing statements and other documents in form reasonably satisfactory to Lender and will do all such acts and things as Lender 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 Property as security for the Loan, subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or desirable; (2) The terms and provisions contained in this section and in Section 25(b) of this Deed of Trust shall, unless the context otherwise requires, have the meanings and be construed as provided in the UCC; (3) This Deed of Trust constitutes a security agreement and financing statement under the UCC with respect to the Property. As such, this Deed of Trust covers any portion of the Property that is personal property including all items which are to become fixtures. Borrower is the "Debtor" and Lender is the "Secured Party" (as those terms are defined and used in the UCC) insofar as this Deed of Trust constitutes a financing statement. (b) Upon the occurrence of a default, Lender may exercise its rights of enforcement with respect to the Fixtures and Personal Property under the UCC, and in conjunction with, in addition to or in substitution for those rights and remedies: (1) Written Notice mailed to Grantor as provided herein ten (10) days prior to the date of public sale of the Fixtures and Personal Property or prior to the date after which private sale of the Fixtures and Personal Property will be made shall constitute reasonable notice; (2) any sale made pursuant to the provisions of this Section shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Deed of Trust Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Columbia, Maryland 31 Fixtures and Personal Property hereunder as is required for such sale of the Deed of Trust Property under power of sale; (3) in the event of a foreclosure sale, whether made under the terms hereof, or under judgment of a court, the Fixtures and Personal Property and the Deed of Trust Property may, at the option of Lender, be sold as a whole; (4) it shall not be necessary that Lender take possession of the Fixtures and Personal Property or any part thereof prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that the Fixtures and Personal Property or any part thereof be present at the location of such sale; (5) prior to application of proceeds of disposition of the Fixtures and Personal Property to the secured indebtedness, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the Reasonable Attorneys' Fees and other legal expenses incurred by Lender; (6) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the indebtedness or as to the occurrence of any default, or as to Lender having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Lender, shall be taken as prima facie evidence of the truth of the facts so stated and recited; (7) Lender may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the sending of notices and the conduct of the sale, but in the name and on behalf of Lender; and (8) this Deed of Trust covers Goods which are or are to become Fixtures related to the Real Property, and covers As-Extracted Collateral related to the Real Property. A carbon, photographic or other reproduction of this Deed of Trust or of any financing statement relating to this Deed of Trust shall be sufficient as a financing statement. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records in the Office of the County Clerk where the Property (including said fixtures) is situated. This Deed of Trust shall also be effective as a financing statement As-Extracted Collateral with respect to all As-Extracted Collateral included within the Real Property (including, without limitation, all oil, gas, Columbia, Maryland 32 other minerals, and other substances of value which may be extracted from the earth and all accounts arising out of the sale at the wellhead or minehead thereof), and is to be filed for record in the real estate records of the county where the Property is situated. The mailing address of Grantor is set forth in Section 43 of this Deed of Trust and the address of Lender from which information concerning the security interest may be obtained is the address of Lender set forth in Section 43 of this Deed of Trust. 26. PROTECTION OF LENDER'S SECURITY. At any time after default hereunder, Lender, or Lender's agents or contractors, is authorized, without notice and in Lender's sole discretion, to enter upon and take possession of the Property or any part thereof, and to perform any acts which Lender deems necessary or proper to conserve the security interest herein intended to be provided by the Property, to operate any business or businesses conducted thereon, and to collect and receive all Rents thereof and therefrom, including those past due as well as those accruing thereafter. 27. APPOINTMENT OF RECEIVER. If, at any time after a default hereunder, Lender deems, in Lender's sole discretion, that a receivership may be necessary to protect the Property or its Rents, whether before or after maturity of the Note and whether before or at the time of or after the institution of foreclosure or suit to collect the Loan or to enforce this Deed of Trust or any of the other Loan Documents, Lender, as a matter of strict right and regardless of the value of the Property or the amounts due hereunder or secured hereby, or of the solvency of any party bound for the payment of such indebtedness, shall have the right, upon ex parte application and without notice to anyone, and by any court having jurisdiction, to the appointment of a receiver to take charge of, manage, preserve, protect and operate the Property, to collect the Rents thereof, to make all necessary and needful repairs, and to pay all taxes, assessments, insurance premiums and other such charges against and expenses of the Property, and to do such other acts as may by such court be authorized and directed, and after payment of the expenses of the receivership and the management of the Property, to apply the net proceeds of such receivership in reduction of the Loan or in such other manner as the said court shall direct notwithstanding the fact that the amount owing thereon may not then be due and payable or the said Loan is otherwise adequately secured. Such receivership shall, at the option of Lender, continue until full payment of all sums hereby secured or until title to the Property shall have passed by sale under this Deed of Trust. Grantor hereby specifically waives its right to object to the appointment of a receiver as aforesaid, and hereby expressly agrees that such appointment shall be made as an admitted equity and as a matter of absolute right to Lender. 28. RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The rights and remedies herein provided are cumulative, and Lender, as the holder of the Note and the Grantor's Guaranty and of every other obligation secured hereby, may recover judgment thereon, issue execution therefor and resort to every other right or remedy available at law or in equity, without first exhausting any right or remedy available to Columbia, Maryland 33 Lender and without affecting or impairing the security of any right or remedy afforded hereby, and no enumeration of special rights or powers by any provisions hereof shall be construed to limit any grant of general rights or powers, or to take away or limit any and all rights granted to or vested in Lender by law or equity. Grantor further agrees that no delay or omission on the part of Lender to exercise any rights or powers accruing to it hereunder shall impair any such right or power, or shall be construed to be a waiver of any such default hereunder or an acquiescence therein; and every right, power and remedy granted herein or by law or equity to Lender may be exercised from time to time as often as Lender deems expedient. Lender may resort to any security given by this Deed of Trust or to any other security now existing or hereafter given to secure the payment of the Loan, in whole or in part, and in such portions and in such order as may seem best to Lender in its sole discretion, and any such action shall not be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Deed of Trust. To the full extent Grantor may do so, Grantor agrees that Grantor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force pertaining to the rights and remedies of sureties or providing for any appraisement, valuation, stay, extension or redemption, and Grantor, for Grantor and Grantor's heirs, devisees, representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of the assets of Grantor, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and security interests hereby created. Grantor shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right of Lender under the terms of this Deed of Trust to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right of Lender under the terms of this Deed of Trust to the payment of such indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. If any law referred to in this Section and now in force, of which Grantor or Grantor's heirs, devisees, representatives, successors and assigns and such other persons claiming any interest in the Property might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. 29. MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without notice and without regard to the consideration, if any, paid therefor, and notwithstanding the existence at that time of any inferior mortgages, deeds of trust, or other liens thereon, may release any part of the security described herein, or may release any person or entity liable for the Loan without in any way affecting the priority of this Deed of Trust, to the full extent of the Loan remaining unpaid hereunder, upon any part of the security not Columbia, Maryland 34 expressly released. Lender may, at its option and within Lender's sole discretion, also agree with any party obligated on the Loan, or having any interest in the security described herein, to extend the time for payment of any part or all of the Loan, and such agreement shall not, in any way, release or impair this Deed of Trust, but shall extend the same as against the title of all parties having any interest in said security, which interest is subject to this Deed of Trust. 30. PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the Property shall be Grantor, or such other manager as may be first approved in writing by Lender. The exclusive leasing agent of the Property, if other than Grantor or the foregoing party, shall be first approved in writing by Lender. The management and leasing contracts (or in the absence of any such written contract, a letter so stating and further identifying the name of the person or entity charged with the responsibility for managing and/or leasing the Property) shall be subordinate to this Deed of Trust, and satisfactory to and subject to the prior written approval of Lender throughout the term of the Loan. Upon default in either of these requirements, then the whole of the Loan hereby secured shall, at the election of Lender, become immediately due and payable, together with any Prepayment Premium, late payment charges and all other sums required by the Note or the other Loan Documents, and Lender shall be entitled to exercise any or all remedies provided for or referenced in this Deed of Trust. 31. MODIFICATION NOT A WAIVER. In the event Lender (a) releases, as aforesaid, any part of the security described herein or any person or entity liable for the Loan; (b) grants an extension of time for the payment of the Note; (c) takes other or additional security for the payment of the Note or the Grantor's Guaranty; or (d) waives or fails to exercise any rights granted herein, in the Note or the Grantor's Guaranty, or any of the other Loan Documents, any said act or omission shall not release Grantor, subsequent purchasers of the Property or any part thereof, or makers, sureties, endorsers or guarantors of the Note, if any, from any obligation or any covenant of this Deed of Trust, the Note, the Grantor's Guaranty, or any of the other Loan Documents, nor preclude Lender from exercising any right, power or privilege herein granted or intended to be granted in the event of any other default then made, or any subsequent default. 32. TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER OR GRANTOR; ASSUMPTION. Except as set forth in Section 38(b) hereof, without the prior written consent of Lender, the sale, transfer, assignment or conveyance of all or any portion of the Property, or the transfer, assignment or conveyance of a controlling interest in Borrower or Grantor or their respective general partners or managing members, or any guarantor, whether voluntary or by operation of law, without the prior written consent of Lender, shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to accelerate all sums due on the Note and the Grantor's Guaranty, together with any Prepayment Premiums (to the extent permitted by the Laws of the State), late payment charges or any other amounts secured hereby. Lender may, however, elect to waive the option to Columbia, Maryland 35 accelerate granted hereunder if, prior to any such sale, transfer, assignment or conveyance of the Property, the following conditions shall be fully satisfied: (a) Lender acknowledges in writing that, in Lender's sole discretion, the creditworthiness of the proposed transferee and the ability and experience of the proposed transferee to operate the Property are satisfactory to Lender, (b) Lender and the proposed transferee shall enter into an agreement in writing that (i) the rate of interest payable on the Loan shall be at such rate as Lender shall determine, (ii) the repayment schedule as set forth in the Note shall be modified by Lender, in Lender's sole discretion, to initiate amortization or modify the existing amortization schedule in order to amortize the then remaining unpaid principal balance of the Note over a period of time as determined by Lender, in Lender's sole discretion, without a change in the maturity date of the Note, and (iii) the proposed transferee shall assume all obligations of Borrower and Grantor under the Note, the Grantor's Guaranty, this Deed of Trust and the other Loan Documents in writing and an assumption fee, to be determined by Lender in Lender's sole discretion, may be charged by Lender; (c) Lender shall receive, for Lender's review and approval, copies of all transfer documents; and (d) Grantor or the transferee shall pay all costs and expenses in connection with such transfer and assumption, including, without limitation, all fees and expenses incurred by Lender. Grantor, or any subsequent owner of the Property or any portion thereof, shall do all things necessary to preserve and keep in full force and effect its and their legal existence, franchises, rights and privileges as a corporation, partnership or limited liability company, as the case may be, under the laws of the State of its formation and its right to own property and transact business in the State. It shall be a default hereunder if Grantor, or any subsequent owner of the Property or any portion thereof, shall amend, modify, transfer, assign or terminate the applicable governing documents for such entity, including its partnership agreement, certificate of partnership, operating agreement, articles of organization, regulations, articles of incorporation or bylaws, as the case may be (as applicable, the "GOVERNING DOCUMENTS"), of Grantor or such subsequent owner without the prior written consent of Lender. Grantor, or such subsequent owner of the Property, shall provide Lender with copies of any proposed amendment to its applicable Governing Documents, so that Lender may, in Lender's sole discretion, determine whether such amendment adversely affects Lender, the Property or the security value thereof. Provided, however, that any amendment, modification, transfer, assignment or termination of Grantor's applicable Governing Documents or any other action pursuant to which the current general partner or managing member of Grantor shall either: (i) cease to be the general partner or managing member of Grantor; or (ii) except to the extent permitted herein, cease to own or maintain a partnership or membership interest in Grantor equal to or greater than its partnership or membership interest at the time this Deed of Trust is executed, shall be deemed to have a material adverse effect upon Lender and the Property, and shall be a default hereunder. Grantor shall not change its name or identity in any manner which may make any financing or continuation statement filed in connection with the Loan seriously misleading Columbia, Maryland 36 within the meaning of the UCC enacted in the State or change its jurisdiction of organization unless Grantor shall have delivered to Lender written notice thereof not less than 30 days before the effective date of such change and shall have taken all action which Lender determines to be reasonably necessary or desirable to confirm and protect Lender's security interests and rights under this Deed of Trust and the perfection and priority thereof. Grantor will not change its principal places of business unless it shall have given Lender prior written notice of its intent to do so not less than thirty (30) days in advance of the effective date of such change. Grantor shall bear all costs incurred by Lender in connection with any such change including, without limitation, Reasonable Attorney's Fees. In the event the ownership of the Property, or any part thereof, shall become vested in a person or entity other than Grantor, whether with or without the prior written consent of Lender, Lender may, without notice to Grantor, deal with such successor or successors in interest with reference to the Property, this Deed of Trust and the other Loan Documents, in the same manner and to the same extent as with Grantor without in any way vitiating or discharging Grantor's liability hereunder or under any of the Loan Documents. No sale, transfer or conveyance of the Property, no forbearance on the part of Lender and no extension of time given by Lender to Grantor for the payment of the Note and the Grantor's Guaranty shall operate to release, discharge, modify, change or affect the original liability of Grantor, either in whole or in part, unless expressly set forth in writing executed by Lender. Notwithstanding anything contained herein to the contrary, Grantor hereby waives any right it now has or may hereafter have to require Lender to prove an impairment of its security as a condition to the exercise of Lender's rights under this Section 32. A sale, transfer, assignment or conveyance within the meaning of this Section shall be deemed to include, but not be limited to, (a) an installment sales agreement wherein Grantor agrees to sell the Property or any part thereof for a price to be paid in installments; (b) an agreement by Grantor leasing all or a substantial part of the Property for other than actual occupancy by a tenant under an Occupancy Lease or a sale, assignment or other transfer of, or the grant of a security interest in, Grantor's right, title and interest in and to any leases or any Rents; (c) if Grantor, any guarantor, any indemnitor, or any general partner or managing member of Grantor, is a corporation, the voluntary or involuntary sale, conveyance, transfer or pledge of such corporation's stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise), or the creation or issuance of new stock by which an aggregate of more than ten percent (10%) of such corporation's stock shall be vested in a party or parties who are not now stockholders; and (d) if Grantor, any guarantor, indemnitor, or any general partner or managing member of Grantor, is a limited partnership, general partnership, limited liability partnership, limited liability company, or joint venture, the change, removal or resignation of a general partner, managing partner, or member, or the transfer or pledge of the interest of any general partner, managing partner, or member or any profits or proceeds relating to such interest. Nothing in this Deed of Trust shall be construed to limit or restrict the transfer of shares of Agree Realty Corporation. Columbia, Maryland 37 Notwithstanding anything contained in this Section 32 to the contrary, as long as no default, or event which, with notice or the passage of time or both, could result in a default, has occurred hereunder, under the Note, the Grantor's Guaranty, or any of the other Loan Documents, Lender shall permit one (1) bona fide arm's length transfer of the Property to another borrowing entity without a change in the terms of the Loan; provided, however, that no such transfer shall be valid or permitted hereunder unless: (i) Lender receives prior Written Notice of such proposed transfer; (ii) such proposed transferee and any substitute guarantor has been approved in writing by Lender (taking into consideration such factors as transferee's creditworthiness, business experience, financial condition and managerial capabilities); (iii) the transferee's (and its sole general partner's or managing member's) single purpose and bankruptcy remote character are satisfactory to Lender in its sole discretion; (iv) Lender has obtained such other legal opinions regarding substantive consolidation issues, enforceability of the assumption documents, no adverse impact on the Securities or any REMIC holding the Note and the Grantor's Guaranty and similar matters as Lender may require, (v) the execution and delivery to Lender of a written assumption agreement covering the Note, the Grantor's Guaranty, this Deed of Trust, and the other Loan Documents and/or substitute guaranty (in Lender's sole and absolute discretion) and such modifications to the Loan Documents executed by such parties and containing such terms and conditions as Lender may require in its sole and absolute discretion prior to such sale or transfer (provided that in the event the Loan is included in a REMIC and are performing Loan, no modification to the terms and conditions shall be made or permitted that would cause (A) any adverse tax consequences to the REMIC or any holders of any Deed of Trust-Backed Pass-Through Securities, (B) this Deed of Trust to fail to be a Qualifying Security Instrument under applicable federal law relating to REMIC's, or (C) result in a taxation of the income from the Loan to the REMIC or cause a loss of REMIC status), (vi) if applicable, the delivery to Lender of an endorsement (at Grantor's sole cost and expense) to Lender's policy of title insurance then insuring the lien created by this Deed of Trust in form and substance acceptable to Lender in its sole judgment; (vii) Lender is paid a cash assumption fee in accordance with the following schedule: Two percent (2%) of the then outstanding principal balance of the Note if such outstanding principal balance is less than or equal to Three Million Dollars ($3,000,000.00), one and one-half percent (1 1/2%) of the then outstanding principal balance of the Note if such outstanding principal balance is in excess of Three Million Dollars ($3,000,000.00); (viii) Grantor pays all fees and expenses incurred by Lender in connection with such transfer and assumption, including, without limitation, inspection and investigation fees, title insurance charges, and Reasonable Attorneys' Fees; (ix) Lender approves the management agreement and leasing agreement, and the management and leasing company to be employed by the proposed transferee; and (x) the transferee is simultaneously purchasing each of the Properties which secure the Affiliate Loans, to the extent such Affiliate Loans remain outstanding. Any transfer of all or any portion of the Property which does not strictly comply with the terms and conditions of the foregoing shall be a default hereunder, and shall entitle Lender to exercise all rights and remedies provided in this Columbia, Maryland 38 Deed of Trust and the other Loan Documents. This one-time right of transfer shall apply to the Grantor named herein and not to any subsequent owner of the Property. 33. FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the Note and the Grantor's Guaranty remain unpaid, Grantor shall not, either voluntarily or involuntarily, permit the Property or any part thereof to become subject to any secondary or subordinate lien, mortgage, deed of trust, security interest or encumbrance of any kind whatsoever without the prior written consent of Lender, and the imposition of any such secondary lien, mortgage, deed of trust, security interest or encumbrance without the approval of Lender shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to declare the outstanding principal balance of the Note, all accrued and unpaid interest thereon, Prepayment Premiums (to the extent permitted by the laws of the State, late payment charges and any other amounts secured hereby to be and become immediately due and payable in full. In the event that Lender shall hereafter give its written consent to the imposition of any such secondary lien, mortgage, deed of trust, security interest or other encumbrance upon the Property, Lender, at Lender's sole option, shall be entitled to accelerate the maturity of the Note and the Grantor's Guaranty and exercise any and all remedies provided and available to Lender hereunder and in the other Loan Documents in the event that the holder of any such secondary lien or encumbrance shall institute foreclosure or other proceedings to enforce the same; it being understood and agreed that a default under any instrument or document evidencing, securing or secured by any such secondary lien or encumbrance shall be and constitute a default hereunder. In the event all or any portion of the proceeds of the Loan are used for the purpose of retiring debt or debts secured by prior liens on the Property, Lender shall be subrogated to the rights and lien priority of the holder or holders of the lien or liens so discharged. 34. CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Grantor agrees that the making of any oil, gas or mineral lease, or the sale or conveyance of any mineral interest or right to explore for minerals under, through or upon the Property, would impair the value of the Property, and that Grantor shall have no right, power or authority to lease the Property, or any part thereof, for oil, gas or other mineral purposes, or to grant, assign or convey any mineral interest of any nature, or the right to explore for oil, gas and other minerals, without first obtaining Lender's express written permission therefor, which permission shall not be valid until recorded among the Land Records of the county in which the Property is located. Grantor further agrees that if Grantor shall make, execute, or enter into any such lease or attempt to grant any such mineral rights without such prior written permission of Lender, then Lender shall have the option, without notice, to declare the same to be a default hereunder, and to declare the Loan immediately due and payable in full. Whether or not Lender shall consent to such lease or grant of mineral rights, Lender shall receive the entire consideration to be paid for any such lease or grant of mineral rights, with the same to be applied to the Loan notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan is otherwise adequately secured; provided, however, that the Columbia, Maryland 39 acceptance of such consideration shall in no way impair the lien of this Deed of Trust on the Property or cure any existing Monetary Default. 35. ESTOPPEL CERTIFICATION BY GRANTOR. Grantor, upon request of Lender therefor made either personally or by mail, shall certify in writing to Lender (or any party designated by Lender), in a form satisfactory to Lender or such designee, the amount of principal and interest then outstanding under the terms of the Note and the Grantor's Guaranty and any other sums due and owing under this Deed of Trust or any of the other Loan Documents, and whether any offsets or defenses exist against the Loan. Such certification shall be made by Grantor within ten (10) days if the request is made personally, or within twenty (20) days if the request is made by mail. 36. CROSS-DEFAULT. The Note is also secured by the terms, conditions and provisions of the Assignment, by three Cross-Default Guaranty Agreements of even date herewith from Agree - Milestone Center Project, L.L.C., a Delaware limited liability company, as guarantor for a loan made by Lender to Agree-Milestone, Omaha, and Oklahoma City, respectively in favor of Lender (hereinafter individually or collectively referred to as the "AFFILIATED-GRANTOR CROSS-DEFAULT GUARANTYS") and, additionally, may be secured by contracts or agreements of guaranty or other security instruments. The terms, covenants, conditions and agreements of each security instrument shall be considered a part hereof as fully as if set forth herein verbatim. Any default under this Deed of Trust, any Affiliated Grantor Cross-Default Guaranty or any of the other Loan Documents shall constitute a default hereunder and under each of the other Loan Documents. Notwithstanding the foregoing, the enforcement or attempted enforcement of this Deed of Trust or any of the other Loan Documents now or hereafter held by Lender shall not prejudice or in any manner affect the right of Lender to enforce any other Loan Document; it being understood and agreed that Lender shall be entitled to enforce this Deed of Trust and any of the other Loan Documents now or hereafter held by it in such order and manner as Lender, in its sole discretion, shall determine. 37. EXAMINATION OF GRANTOR'S RECORDS. Grantor will maintain complete and accurate books and records showing in detail the income and expenses of the Property, and will permit Lender and its agents, contractors or representatives to examine said books and records and all supporting vouchers and data during normal business hours and from time to time upon request by Lender, in such place as such books and records are customarily kept. Grantor will furnish to Lender, within one hundred twenty (120) days after the close of each respective fiscal period annual and quarterly financial statements (income statements and a balance sheet) for the Grantor and the Property. Grantor will furnish to Lender on or before 45 calendar days after the end of each calendar quarter the following items, each certified by Grantor as being true and correct, in such format and in such detail as Lender or its servicer may request: (a) a written statement (rent roll) dated as of the last day of each such calendar quarter identifying each of the Occupancy Leases by the term, space occupied, rental required Columbia, Maryland 40 to be paid (including percentage rents and tenant sales), security deposit paid, any rental concessions, all rent escalations, any rents paid more than one month in advance, any special provisions or inducements granted to tenants, any taxes, maintenance and other common charges paid by tenants, all vacancies and identifying any defaults or payment delinquencies thereunder; and (b) quarterly and year-to-date operating statements prepared for each calendar quarter during each such reporting period detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow. These statements shall be in form acceptable to Lender and its servicer, shall be prepared in accordance with generally accepted accounting principles, and shall include a rent roll, certified as true and correct by Grantor. The statements shall show in detail all income derived from and expenses incurred in connection with the ownership of the Property, including current annual sales figures for all Major Tenants of the Property if required under the Major Tenant leases or if such financial information is otherwise available. Grantor shall deliver to Lender, for Grantor, or any entity with whom Grantor's tax return is consolidated, copies of all income tax returns, requests for extension and other similar items contemporaneously with its delivery of same to the Internal Revenue Service. In the event Grantor fails to provide such statements to Lender within the time prescribed above, Grantor shall pay Lender the sum of $200.00 in administrative expenses for each successive month for which the statements are delinquent (or in the case of such statements to be delivered prior to the transfer of the Loan to Investor (hereafter defined), for each successive week for which the statements are delinquent). Upon a default hereunder, Lender shall have the right to require that said financial statements be audited and certified by a certified public accountant acceptable to Lender, at the sole cost and expense of Grantor. Prior to the transfer of the Loan to Investor by Lender, Grantor shall deliver to Lender the reports required above on a monthly basis. Such reports shall be delivered within ten calendar days after the end of each calendar month. In addition, at the request of Lender, but in no case more often than once a quarter nor more than three (3) times during the term of the Loan, unless a default has occurred, Grantor shall furnish to Lender (i) unaudited financial statements (balance sheet, income statement, cash flow statement and current rent roll) covering operation of the Property for periods other than those set forth in the preceding paragraph and (ii) unaudited financial statements (balance sheets, income statements, and cash flow statements) for Grantor, its general partner(s), shareholder(s) or member(s) (whichever is applicable) and for such other principals of Grantor as designated by Lender, provided that for so long as the Property is held by Grantor such statements shall be required only for Grantor and Agree Realty Corporation. All such statements shall be certified to Lender to be complete, correct, and accurate by the individual (for an individual's statements) or by an authorized representative of the entity (if statements are for a partnership, corporation or limited liability company). Columbia, Maryland 41 Any inspection or audit of the Property or the books and records of Grantor, or the procuring of documents and financial and other information, by or on behalf of Lender, shall be at Grantor's expense and shall be for Lender's protection only, and shall not constitute any assumption of responsibility or liability by Lender to Grantor or anyone else with regard to the condition, construction, maintenance or operation of the Property, nor Lender's approval of any certification given to Lender nor relieve Grantor of any of Grantor's obligations. 38. ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED. Grantor covenants and agrees to permit or suffer none of the following without the prior written consent of Lender: (a) Any structural alteration of, or addition to, the Improvements now or hereafter situated upon the Real Property, or the addition of any new buildings or other structure(s) thereto, other than the erection or removal of non-load bearing interior walls or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect; or (b) The removal, transfer, sale or lease of the Property, except that the removal, replacement or substitution of fixtures, equipment, machinery, apparatus and articles of personal property (replacement or substituted items must be of like or better quality than the removed items in their original condition) encumbered hereby may be made in the normal course of business; or (c) The use of any of the Improvements now or hereafter situated on the Real Property for any purpose other than the Existing Use and related facilities, or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect. 39. FUTURE ADVANCES SECURED. This Deed of Trust shall secure not only existing indebtedness, but also future advances, whether such advances are obligatory or to be made at the option of Lender. Upon the request of Grantor, and at Lender's option prior to release of this Deed of Trust, Lender may make future advances to Grantor. All future advances with interest thereon shall be secured by this Deed of Trust to the same extent as if such future advances were made on the date of the execution of this Deed of Trust unless the parties shall agree otherwise in writing, but the total secured indebtedness shall not exceed at any one time a maximum principal amount equal to double the face amount of the Note plus interest and costs of collection, including court costs and Reasonable Attorneys' Fees. Any advances or disbursements made for the benefit or protection of or the payment of taxes, assessments, levies or insurance upon the Property, with interest on such disbursements as provided herein, shall be added to the principal balance of the Note and collected as a part thereof. To the extent that Grantor's Guaranty secured by this Deed of Trust may secure more than one note, a default in the payment of any such mortgage note shall constitute a default in the payment of all such Note. Columbia, Maryland 42 40. EFFECT OF SECURITY AGREEMENT. Grantor agrees to, and shall upon the request of Lender, execute and deliver to Lender, in form and content satisfactory to Lender, such financing statements, descriptions of property and such further assurances as Lender, in Lender's sole discretion, may from time to time consider necessary to create, perfect, continue and preserve the lien and encumbrances hereof, and the security interest granted herein, upon and in the Property. Without the prior written consent of Lender, Grantor shall not create or suffer to be created, pursuant to the UCC, any other security interest in such real and personal property and fixtures described herein. Upon the occurrence of a default hereunder or Grantor's breach of any other covenants or agreements between the parties entered into in conjunction herewith, Lender shall have the remedies of a secured party under the UCC as provided in Section 25, and at Lender's option, the remedies provided for in this Deed of Trust and the other Loan Documents. Lender, at the expense of Grantor, may cause such statements, descriptions and assurances, as herein provided in this Section 40, and this Deed of Trust, to be recorded and re-recorded, filed and refiled, at such times and in such places as may be required or permitted by law to so create, perfect and preserve the lien and encumbrance hereof upon all of the Property. 41. TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions of the Application for Deed of Trust Loan dated August 28, 2003, and any subsequent amendments thereto (the "APPLICATION"), executed by and between Grantor and Lender, are incorporated herein by reference. All terms, covenants, conditions and agreements of the Application not expressly set forth in this Deed of Trust and any of the other Loan Documents shall survive the execution and delivery hereof, and remain in full force and effect. In the event any conflict exists between the terms, covenants, conditions and agreements of the Application and the Loan Documents, the terms, covenants, conditions and agreements of the Loan Documents shall prevail. 42. SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof shall be binding upon Grantor and the heirs, personal representatives, trustees, successors and assigns of Grantor, and shall inure to the benefit of Lender, its successors and assigns. Where more than one Grantor is named herein, the obligations and liabilities of said Grantor shall be joint and several. Wherever used in this Deed of Trust, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein: (a) the word "Grantor" shall mean Grantor and/or any subsequent owner or owners of the Property; (b) the word "Lender" shall mean Lender or any subsequent holder or holders of this Deed of Trust; (c) the word "Note" shall mean the Note(s) secured by this Deed of Trust; and (d) the word "person" shall mean an individual, trustee, trust, corporation, partnership, limited liability corporation, limited liability partnership, joint venture or unincorporated association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean fees charged by attorneys selected by Lender based upon such attorneys' then prevailing hourly rates as opposed to any statutory presumption Columbia, Maryland 43 specified by any statute then in effect in the State. As used herein words of any gender shall include all other genders. 43. NOTICES. All notices, reports, requests or other written instruments required or permitted hereunder, shall be in writing, signed by the party giving or making the same, and shall be sent hand-delivered, effective upon receipt, sent by United States Express Mail or by a nationally recognized overnight courier, effective upon receipt, or sent by United States registered or certified mail, postage prepaid, with return receipt requested, deemed effective on the earlier of the day of actual delivery as shown by the addressee's return receipt or the expiration of three business days after the date of mailing, addressed to the party intended to receive the same at the address set forth below or at such other address as shall be given in writing by any party to another ("WRITTEN NOTICE"): If to Grantor: AGREE-COLUMBIA CROSSING PROJECT, LLC 31850 Northwestern Highway Farmington Hills, Michigan 48334 Attention: Mr. Richard Agree If to Lender: NATIONWIDE LIFE INSURANCE COMPANY One Nationwide Plaza Columbus, Ohio 43215-2220 Attention: Real Estate Investment Department, 34T 44. GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. GRANTOR AND LENDER, EACH TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM WHICH ANY PARTY MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, Columbia, Maryland 44 CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, GRANTOR WAIVES ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Deed of Trust and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the internal laws of the State, without regard to principles of conflicts of laws. The parties hereto irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Deed of Trust may be brought in a court of record in the State or in the courts of the United States of America located in such State, (b) consent to the non-exclusive jurisdiction of each such court in any suit, action or proceeding, and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. If any clauses or provisions herein contained operate, or would prospectively operate, to invalidate this Deed of Trust, then such clauses or provisions only shall be held for naught, as though not herein contained, and the remainder of this Deed of Trust shall remain operative and in full force and effect. 45. RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising under the terms, covenants, conditions and agreements contained in this Deed of Trust shall be separate, distinct and cumulative, and none of them shall be in exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provisions, anything herein or otherwise to the contrary notwithstanding. If Grantor is comprised of more than one person or entity, then the liability of each such person and entity hereunder shall be joint and several. 46. MODIFICATIONS. This Deed of Trust cannot be changed, altered, amended or modified except by an agreement in writing and in recordable form, executed by both Grantor and Lender. 47. EXCULPATION. Notwithstanding anything contained herein to the contrary, the liability of Grantor is subject to the limited recourse provisions contained in the Exculpation section of the Note, which are incorporated herein and made a part hereof by reference as if fully set forth herein. 48. FULL RECOURSE. Notwithstanding any provisions in this Deed of Trust to the contrary, including without limitation the provisions set forth in the section captioned "Exculpation" hereinabove, Grantor shall be personally liable, jointly and severally, for the entire Loan secured by this Deed of Trust (including all principal, interest and other charges) in the event (a) Grantor violates the covenant governing the placing of subordinate financing on the Property as set forth in this Deed of Trust; (b) Grantor violates the covenant restricting transfers of interests in the Property or transfers of ownership interests in Grantor as set forth in this Deed of Trust; or (c) Grantor or any guarantor violates the provisions of Section 22 of this Deed of Trust, or there is filed against Grantor or any guarantor or indemnitor of the Columbia, Maryland 45 Loan, a petition in bankruptcy or for the appointment of a receiver, or there commences under any bankruptcy or insolvency law, proceedings for Grantor's relief, or for the compromise, extension, arrangement or adjustment of Grantor's obligations which is not dismissed within thirty (30) days after the filing of same. 49. LENDER IS NOT A JOINT VENTURER OR PARTNER. Grantor and Lender acknowledge and agree that in no event shall Lender be deemed to be a partner or joint venturer with Grantor or any member of Grantor. Without limitation of the foregoing, Lender shall not be deemed to be a partner or joint venturer on account of its becoming a mortgagee in possession or exercising any rights pursuant to this Deed of Trust or pursuant to any other instrument or document evidencing or securing any of the indebtedness secured hereby, or otherwise. 50. CAPTIONS. The captions set forth at the beginning of the various Sections of this Deed of Trust are for convenience only, and shall not be used to interpret or construe the provisions of this Deed of Trust. 51. TRUSTEES. Trustees hereby accept the trust created by this Deed of Trust, upon the terms and subject to the conditions set forth herein, including the following: Trustees assume no responsibility for and make no representations as to (i) the description, identification or value of the Property or any part thereof, (ii) the validity or sufficiency of the Loan Documents, (iii) Borrower's or Grantor's present or future financial condition, or (iv) the validity or collectibility of the Note or the Grantor's Guaranty. Trustees (i) may exercise their powers and perform their duties hereunder either directly or by or through such attorneys, agents, servants as they shall appoint, and (ii) shall not be answerable or liable (x) for the acts, negligence or default of any such attorney, agent or servant which Trustees may so appoint so long as the same are selected with care, or (y) for any act or omission of Lender, or (z) for any other cause arising under this Deed of Trust or otherwise, except for each such Trustee's own individual willful misconduct. Trustees, in their discretion may consult with legal counsel selected and employed by Trustees, and Trustees shall incur no liability to Grantor, Lender or to any other person by reason of any action taken, suffered or omitted by Trustees in accordance with the opinion of such counsel. Trustees shall be under no obligation to sell the Property or any part thereof upon a default hereunder, or to exercise any of the rights or powers vested in Trustees by this Deed of Trust, except upon the written request or direction of Lender and upon Lender furnishing security or an indemnity satisfactory to Trustees against costs, expenses and liabilities incurred Columbia, Maryland 46 or which may be incurred by Trustees in selling the Property or in complying with such request or direction. At any time that more than one person is acting as Trustee hereunder, the powers vested in Trustees may be exercised by either Trustee acting individually in the event of the unavailability of the other Trustee. Any person acting as Trustee hereunder may resign as Trustee upon written notice to the Lender. Lender may remove Trustees at any time or from time to time for any reason (with or without cause) and appoint a successor trustee or trustees, and upon such appointment, all powers, rights, duties and authority of Trustees, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall be appointed by written instrument duly recorded in the county or counties where the Property covered hereby is located, which appointment may be executed by any authorized agent of Lender or in any other manner permitted by applicable law. 52. SPLITTING OF DEED OF TRUST. This Deed of Trust and the Note and the Grantor's Guaranty, shall, at any time until the same shall be fully paid and satisfied, at the sole election of Lender, be split or divided into two or more notes and two or more security instruments, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Grantor, upon written request of Lender, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Lender and/or its designee or designees substitute notes and security instruments in such principal amounts, aggregating not more than the then unpaid principal amount of Loan, and containing terms, provisions and clauses similar to those contained herein and in the Note and the Grantor's Guaranty, and such other documents and instruments as may be required by Lender. 53. REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note, the Grantor's Guaranty or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note, the Grantor's Guaranty, or other Loan Document, Grantor, at its expense, will issue or cause to be issued, in lieu thereof, a replacement Note, the Grantor's Guaranty, or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note, Grantor's Guaranty, or other Loan Document in the same principal amount thereof and otherwise of like tenor. 54. SOLE DISCRETION OF LENDER. Wherever pursuant to this Deed of Trust Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Columbia, Maryland 47 Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 55. TRANSFER OF LOAN. (a) Lender may, at any time, sell, transfer or assign the Note, the Grantor's Guaranty, this Deed of Trust, the Assignment and the other Loan Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "SECURITIES"), or otherwise sell the Loan or an interest therein (a "SECONDARY MARKET TRANSACTION"). Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor in such Securities or in connection with a Secondary Market Transaction or any Rating Agency rating such Securities (collectively, the "INVESTOR") and each prospective Investor, all documents and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, Grantor, any Guarantor and the Property, whether furnished by Borrower, Grantor, any Guarantor or otherwise, as Lender determines necessary or desirable. Grantor acknowledges that certain information regarding the Loan and the parties thereto and the Property may be included in a private placement memorandum, prospectus or other disclosure documents. The term "RATING AGENCY" shall mean each statistical rating agency that has assigned a rating to the Securities. (b) Grantor shall cooperate in good faith with Lender in effecting any such Secondary Market Transaction and shall cooperate in good faith to implement all requirements reasonably imposed by the participants involved in any Secondary Market Transaction (including without limitation, a Rating Agency and/or an Investor) including, without limitation, all structural or other changes to the Loan, modifications to any documents evidencing or securing the Loan, delivery of opinions of counsel acceptable to the Rating Agency or such Investors and addressing such matters as the Rating Agency or such Investors may require; provided, however, that the Grantor shall not be required to modify any documents evidencing or securing the Loan which would modify (i) the interest rate payable under the Note, (ii) the stated maturity of the Note, (iii) the amortization of principal of the Note, or (iv) any other material terms or covenants of the Loan. (c) If Securities are issued in connection with the Loan or a Secondary Market Transaction occurs with respect to the Loan, all Funds held by Lender in escrow or pursuant to reserves in accordance with the Loan Documents shall be deposited in "eligible accounts" at "eligible institutions" and invested in "permitted investments" as then defined and required by any Rating Agency. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Columbia, Maryland 48 IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first above written. GRANTOR: AGREE - COLUMBIA CROSSING PROJECT, L.L.C., a Delaware limited liability company By: AGREE LIMITED PARTNERSHIP, a Delaware limited partnership Its Member By: AGREE REALTY CORPORATION, a Maryland corporation Its General Partner By: /s/ Richard Agree _____________________ Richard Agree President STATE OF ) ) COUNTY OF ) The foregoing instrument was acknowledged before me this _____ day of October, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a Maryland corporation, on behalf of the corporation as general partner of Agree Limited Partnership, a Delaware partnership, as member of Agree - Columbia Crossing Project, L.L.C., a Delaware limited liability company. ____________________________________________ Name: ______________________________________ Notary Public My Commission Expires: _____________________ (SEAL) Columbia, Maryland S-1 The undersigned, an attorney admitted to practice before the Court of Appeals of Maryland, hereby certifies that the within instrument was prepared by me or under my supervision. ___________________________ Attorney's Name:__________________ Columbia, Maryland S-2 EXHIBIT A (Legal Description) SITUATED IN THE CITY OF COLUMBIA, COUNTY OF HOWARD, STATE OF MARYLAND: BEING KNOWN AND DESIGNATED as Parcel No. CC as shown on plat entitled "Columbia, Route 175 Commercial, Section 1 Area 1, Parcels 'AA' thru 'CC' & Lot 2, A Resubdivision of Parcels V, Y, Z and Lot 1, Route 175 Commercial as shown on Plat Nos. 12065, 12865 & 13104", which plat is recorded among the Land Records of Howard County in Plat Book M.D.R. No. 13550. BEING the same lot of ground which by Deed dated April 30, 1999 and recorded among the Land Records of Howard County in Liber No. 4721, folio 444 was granted and conveyed by The Howard Research and Development Corporation, (formerly known as HRD Holdings, Inc.) to Agree-Columbia Crossing Project, L.L.C., a Delaware limited liability corporation. BEING ALSO the same lot of ground described in an unrecorded Lease between Agree-Columbia Crossing Project, L.L.C. and Borders, Inc. dated April 30, 1999. TOGETHER WITH the non-exclusive easements contained in Construction, Operation and Reciprocal Easement Agreement dated March 8, 1996 and recorded among the Land Records of Howard County in Liber 3678 folio 376, as amended by Restated Construction Operation and Reciprocal Easement Agreement dated July 31, 1996 and recorded in Liber 3782 folio 147, amended by First Amendment to Amended and Restated Construction, Operation and Reciprocal Easement Agreement dated July 7, 1997 and recorded in Liber 4013 folio 362. Tax Account No. 16-213896 Columbia, Maryland A - 1 EX-10.34 4 k82459exv10w34.txt INDEMNITY DEED OF TRUST AGREEMENT - MILESTONE CTR. Recorded at the Request of and EXHIBIT 10.34 When Recorded Return to: Pepe & Hazard LLP NOT SUBJECT TO 225 Asylum Street - 22nd Floor RECORDATION TAX Hartford, CT 06103-4302 Attention: Adam F. Zweifler, Esq. MAXIMUM PRINCIPAL AMOUNT SECURED IS $3,310,000.00 GRANTOR NOT PRIMARILY LIABLE FOR DEBT SECURED INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT This INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT (the "DEED OF TRUST") is dated as of the 31st day of October, 2003, by AGREE-MILESTONE CENTER PROJECT, LLC, a Delaware limited liability company ("GRANTOR"), having its principal office at 31850 Northwestern Highway, Farmington Hills, Michigan 48334 to and in favor of JON M LARIA AND ANNE HEESTERS SCHROTH, having an address c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, 18th Floor, Baltimore, Maryland 21202 (the "TRUSTEE"), as trustee for NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its successors and assigns ("LENDER"), having its principal office at One Nationwide Plaza, Columbus, Ohio 43215-2220, Attention: Real Estate Investment Department, 34T, or at such other place as Lender may from time to time designate. W I T N E S S E T H: WHEREAS, Lender has made four loans of even date herewith in the aggregate total original principal amount of Fifteen Million Dollars ($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the following loans of even date herewith: a loan from Lender to AMCP Germantown LLC, a Delaware limited liability company (the "BORROWER"), in the original principal amount of $3,310,000.00 (this "LOAN"); a loan to ACCP Maryland LLC, a Delaware limited liability company ("AGREE-COLUMBIA"), in the original principal amount of $3,520,000.00 (the "AGREE-COLUMBIA LOAN"); a loan to Omaha Store No. 166 L.L.C., a Delaware limited liability company ("OMAHA") in the original principal amount of $3,910,000.00 (the "OMAHA LOAN"); and a loan to Oklahoma City Store No. 151 L.L.C., a Delaware limited liability company ("OKLAHOMA CITY"), in the original principal amount of $4,260,000.00 (the "OKLAHOMA CITY LOAN"). Agree-Columbia, Omaha and Oklahoma City are hereinafter referred to collectively as the "AFFILIATED BORROWERS". The Agree-Columbia Loan, the Omaha Loan and the Oklahoma City Loan are hereinafter referred to generically as an "AFFILIATE LOAN" and collectively as the "AFFILIATE LOANS"; Germantown, Maryland WHEREAS, the Borrower is justly indebted to Lender under the Loan in the original principal sum of Three Million Three Hundred Ten Thousand and 00/100 Dollars ($3,310,000.00), with interest thereon, which Loan is evidenced and represented by that certain Note of even date herewith (which Note, as the same may be extended, renewed, replaced, amended, restated or otherwise modified, are hereinafter referred to as the "NOTE"), both principal and interest being payable as therein provided, with the first payment on the Note becoming due and payable on the date of disbursement; and WHEREAS, Grantor has guaranteed to Lender the payment and performance of Borrower's obligations under the Note pursuant to a Guaranty Agreement of even date herewith by Grantor (which Guaranty Agreement, as the same may be extended, renewed, replaced, amended, restated or otherwise modified, is hereinafter referred to as the "GRANTOR'S GUARANTY"). The terms, covenants and conditions of the Grantor's Guaranty are hereby specifically incorporated in this Deed of Trust by reference; and WHEREAS, Lender, as a condition precedent to the extension of credit and the making of the Loan, evidenced by the Note and guaranteed by the Grantor's Guaranty, has required that Grantor provide Lender with security for the repayment of the Loan as well as for the performance, observance and discharge by Grantor of various terms, covenants, conditions and agreements made by Grantor to, with, in favor of and for the benefit of Lender with respect to the Loan and such security; WHEREAS, (i) the Grantor's obligations under the Grantor's Guaranty represent a contingent liability that does not mature until there has been an uncured default by Borrower under the Loan Documents, (ii) Grantor and Borrower are separate and distinct entities, and (iii) Grantor is not primarily liable for the obligations of Borrower under the Loan Documents. NOW THEREFORE, in consideration of and in order to secure the Grantor's Guaranty, together with interest thereon, as well as the payment of all other sums of money secured hereby, as hereinafter provided; to secure the observance, performance and discharge by Grantor of all terms, covenants, conditions and agreements set forth in the Grantor's Guaranty, this Deed of Trust, and in all other documents and instruments executed and delivered by Grantor to and in favor of Lender for the purpose of further securing the repayment of the Grantor's Guaranty; in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of one dollar paid by Lender to Grantor, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged by Grantor, Grantor does hereby grant, bargain, sell, convey, assign, transfer, pledge, deliver, hypothecate, warrant and confirm unto Lender forever, all of Grantor's right, title and interest in and to the following described properties, including all rights, interests, replacements, Germantown, Maryland 2 substitutions and additions thereto, therein or therefore (collectively, the "DEED OF TRUST PROPERTY"): (i) All that certain piece, parcel or tract of land or real property of which Grantor is now seized and in actual or constructive possession, situated in the City of Germantown, County of Montgomery, and State of Maryland (the "STATE"), and being more particularly described on EXHIBIT A attached hereto and by this reference made a part hereof (the "REAL PROPERTY"); (ii) All buildings, structures and other improvements of any kind, nature or description now or hereafter erected, constructed, placed or located upon the Real Property (the "IMPROVEMENTS"), including, without limitation, any and all additions to, substitutions for or replacements of such Improvements; (iii) All minerals, royalties, gas rights, water, water rights, water stock, flowers, shrubs, lawn plants, crops, trees, timber and other emblements now or hereafter located on, under or above all or any part of the Real Property; (iv) All and singular, the tenements, hereditaments, strips and gores, rights-of-way, easements, privileges, profits and other appurtenances now or hereafter belonging or in any way appertaining to the Real Property, including, without limitation, all right, title and interest of the Grantor in any after-acquired right, title, interest, remainder or reversion in and to the beds of any ways, streets, avenues, roads, alleys, passages and public places, open or proposed, in front of, running through, adjoining or adjacent to the Real Property (the "APPURTENANCES"); (v) Any and all leases, licenses, contracts, rents, license fees, royalties, issues, revenues, profits, proceeds, deposits, income and other benefits, including accounts receivable, termination fees, of, accruing to or derived from the Real Property, Improvements and Appurtenances, and any business or enterprise presently situated or hereafter operated thereon and therewith and all of Grantor's right, title and interest under any and all lease guaranties, letters of credit, and any other credit support furnished to Grantor in connection with any of the foregoing (the "RENTS"); (vi) Any and all awards, payments or settlements, including interest thereon, and the right to receive the same, as a result of: (a) the exercise of the right of eminent domain; (b) the alteration of the grade of any way, street, avenue, road, alley, passage or public place; (c) any other injury, damage, casualty or claim relating to the taking of, or decrease in the value of, the Real Property, Improvements or Appurtenances; or (d) proceeds of insurance awards, to the extent of all amounts which may be secured by this Deed of Trust at the date of any such award or payment including but not limited to Reasonable Attorneys' Fees (as hereinafter Germantown, Maryland 3 defined), costs and disbursements incurred by Lender in connection with the collection of such award or payment; (vii) All fixtures, materials, equipment, machinery, apparatus, appliances, and other property whatsoever now or hereafter attached to, installed in, or used in connection with the buildings and other improvements now erected or hereafter to be erected on said land, including, but not limited to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators, air-conditioning and sprinkler systems, gas and electric fixtures, carpets, rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all other furnishings, tools, equipment and machinery, appliances, building supplies, materials, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing, all of which property and things are hereby declared to be permanent fixtures and accessions to the freehold and part of the realty conveyed herein as security for the indebtedness herein mentioned; and (viii) All agreements or contracts relating to any interest rate cap agreements, swaps or other interest hedging agreements; TO HAVE AND TO HOLD the foregoing Deed of Trust Property and the rights hereby granted for its use and benefit unto Lender, Trustees and its successors and assigns in fee simple forever, successors in interest of Trustees, in trust, in fee simple forever; FIRST: Until any default in payment of any matter of indebtedness hereby secured as herein provided for, or until breach of any of the covenants, agreements, terms or conditions herein contained, to permit Grantor, its successors and assigns, to possess and enjoy said Property and to receive the rents, issues and profits thereof; and on full payment of the Note, the Grantor's Guaranty, and of any extensions or renewals thereof, and interest thereon, and all sums advanced or expended as herein provided, and all other proper costs, charges, expenses, commissions, at any time before the sale hereinafter provided for, to release and reconvey unto and at the cost of Grantor, or the party or parties then claiming under Grantor, the aforesaid Property. SECOND: Upon any default being made in payment under the Grantor's Guaranty or any installment of principal, interest or either, due thereunder, or any renewal or extension thereof, or this Deed of Trust; or upon any default in the performance of any of the covenants, conditions or agreements herein or in the Grantor's Guaranty contained; then upon any such default so made as aforesaid: The Grantor, in accordance with the Maryland Rules of Procedure or any Public General Law or Public Local Law of the State of Maryland relating to deeds of trust or mortgages, including any supplements, amendments or additions thereto, does hereby assent to Germantown, Maryland 4 the passage of a decree by the Circuit Court for Montgomery County, as may be required by applicable law; or The Trustees or substitute Trustees shall have the power and, upon the direction of the Lender, the duty to sell and in the event of default by any purchaser, to re-sell the herein described Property. Upon any such sale, whether made under the assent to the passing of a decree or under the power of sale, the party selling may sell the Property as a whole or in such parcel or parcels, manner or order, as such party selling may, in its sole discretion, elect; such sale may also be at the sole discretion of the party selling subject to any one or more existing tenancies. Such sale shall be at public auction at such time and place, upon such terms and conditions, and after such previous public notice (in compliance with the Maryland Rules of Procedure and any other applicable law) as Trustees, or substitute Trustees, shall deem best for the interest of all parties concerned, and (the terms of the sale being complied with), Trustees shall convey to the purchaser or purchasers at the cost of such purchaser or purchasers, the Property so sold, such purchaser or purchasers being hereby discharged from all liability for the application of the purchase money; and shall apply the proceeds of sale (after paying from the proceeds all expenses of sale of every kind and nature whatsoever, including, without limitation, reasonable attorneys' fees, all taxes and assessments thereon due, all insurance premiums and fees for guard or watchmen services, all utility charges of whatsoever nature whether or not listed on the real property tax bill, all sums advanced as herein provided, and a trustees' commission equal to the commission allowed trustees for making sales of property under decrees of the equity courts having jurisdiction), to the payment of the indebtedness due and outstanding under the Grantor's Guaranty whether matured or not, and the interest thereon, to date of payment from purchaser, paying over the surplus, if any, to Grantor, its successors or assigns, upon the surrender and delivery to the purchaser or to the heirs, personal representatives, successors or assigns of purchaser, of the possession of the Property so sold and conveyed, less the expense, if any, of obtaining possession thereof. Half of such commissions and all such expenses and costs shall be paid by Grantor, its heirs, successors or assigns in the event that the debt evidenced by the Note shall be paid after any advertisement of the Property, but before sale thereof. The Trustees may act hereunder and may sell and convey said Property under power granted above although the Trustees have been, may now be or may hereafter be attorneys or agents of the Lender. In the event that the purchaser at such sale or resale shall be the then holder of the Note, the Grantor's Guaranty which is entitled to receive the proceeds of such sale, then the person responsible for conducting the sale shall accept on account of the purchase price, without requiring the actual payment of money, the written receipt of such purchaser for up to the amount of proceeds to which such purchaser is entitled, except such sums as are necessary to pay the above-mentioned expenses of sale. The holder of the Note, the Grantor's Guaranty, as purchaser, need not tender cash or the equivalent thereof as a required deposit in connection with any such sale. Germantown, Maryland 5 Grantor, in addition, agrees that Lender, may in the event of default, proceed under the Uniform Commercial Code as presently contained in the Commercial Law Article of the Annotated Code of Maryland, and any and all amendments, additions and supplements thereto as to all or any part of the chattels, personal property, equipment and fixtures included in the Property described aforesaid and Grantor agrees that the Trustees shall have and may exercise with respect to all such chattels, personal property, equipment and fixtures aforesaid, all the rights, remedies and powers of a secured party under the Uniform Commercial Code including, without limitation, the right and power to replevy, sell or otherwise dispose of, foreclose upon, lease or utilize all or any part of such chattels, personal property, equipment and fixtures aforesaid in any manner authorized or permitted under said Uniform Commercial Code. In order to secure the repayment of the Loan guaranteed by the Grantor's Guaranty, together with interest on the Loan, as well as the payment of all other sums of money secured hereby, as hereinafter provided; and to secure the observance, performance and discharge by Grantor of all covenants, conditions and agreements set forth in the Grantor's Guaranty, this Deed of Trust and in the other documents and instruments executed and delivered by Grantor to and in favor of Lender for the purpose of further securing the repayment of the Loan guaranteed by the Grantor's Guaranty; and in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of Ten Dollars ($10.00) paid by Lender and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Grantor hereby grants Trustees, their successors and assigns, a security interest in all Fixtures, Goods (including, without limitation, Consumer Goods, Inventory, Equipment and Farm Products), Accounts, Chattel Paper (including, without limitation, Electronic Chattel Paper and Tangible Chattel Paper), Instruments, General Intangibles (including, without limitation, Payment Intangibles and Software), Letters of Credit, Letter-of-Credit Rights, Documents, As-Extracted Collateral, Money and Deposit Accounts of every kind, and all proceeds thereof, including, without limitation, any and all licenses, permits, franchises, trademarks, trade names, service marks or logos, plans, specifications, maps, construction contracts, instruments, insurance policies, fittings and fixtures of every kind, which is, are or shall hereafter be located upon, attached, affixed to or used or useful, either directly or indirectly, in connection with the complete and comfortable use, occupancy and operation of the Real Property, Improvements or Appurtenances as a retail project (the "EXISTING USE"), or any other business, enterprise or operation as may hereafter be conducted upon or with said Real Property, Improvements or Appurtenances, including, without limitation, any and all licenses, permits or franchises, used or required in connection with such use, occupancy or operation as well as the proceeds thereof or therefrom regardless of form, all security deposits and advance rentals under lease agreements now or at any time hereafter covering or affecting any of the Property and held by or for the benefit of Grantor, all monetary deposits which Grantor has been required to give to any public or private utility with respect to utility services furnished to the Real Property Germantown, Maryland 6 or Improvements, all rents, issues and profits from leases of all or any part of the Real Property or Improvements, all proceeds (including premium refunds) of each policy of insurance relating to the Real Property or Improvements, all proceeds from the taking of the Real Property or Improvements or any part thereof or any interest therein or right or estate appurtenant thereto by eminent domain or by purchase in lieu thereof, all amounts deposited in escrow for the payment of ad valorem taxes, assessments, charges, ground rentals and/or premiums for policies of insurance with respect to the Real Property or Improvements, all proceeds and other amounts paid or owing to Grantor under or pursuant to any and all contracts and bonds relating to the construction, erection or renovation of the Real Property or Improvements, all oil, gas and other hydrocarbons and other minerals produced from or allocated to the Real Property and all products processed or obtained therefrom, the proceeds thereof, and all accounts and general intangibles under which such proceeds may arise, together with any sums of money that may now or at any time hereafter become due and payable to Grantor by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of any kind or character arising under any and all present and future oil, gas and mining leases covering the Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL PROPERTY," which term expressly excludes any toxic waste or substance deemed hazardous under federal, regional, state or local laws, codes, ordinances, statutes, rules, regulations, decisions or orders). The Deed of Trust Property and the Fixtures and Personal Property are herein together referred to as the "PROPERTY". Except as otherwise expressly provided in this Deed of Trust, all terms in this Deed of Trust relating to the Property and the grant of the foregoing security interest which are defined in the Uniform Commercial Code of the State (the "UCC") shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the UCC, as those meanings may be amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the UCC have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the UCC in effect on the date of this Deed of Trust, then such term, as used herein, shall be given such broadened meaning. If the UCC shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the UCC in effect on the date of this Deed of Trust, such amendment or holding shall be disregarded in defining terms used in this Deed of Trust. Grantor hereby covenants and warrants with and to Lender that Grantor is indefeasibly seized of the Property and has good right, full power, and lawful authority to convey and encumber all of the same as aforesaid; that Grantor hereby fully warrants the title to the Property and will defend the same and the validity and priority of the lien and encumbrance of this Deed of Trust against the lawful claims of all persons whomsoever; and Grantor further warrants that the Property is free and clear of all liens and encumbrances of any kind, nature or description, save and except only (with respect to said Real Property, Improvements and Appurtenances) for real property taxes for years subsequent to 2004 (which are not yet due and Germantown, Maryland 7 payable) and those exceptions accepted by Lender as set forth in the title insurance commitment or proforma policy issued to Lender precedent to the issuance of a Lender's Policy of Title Insurance insuring the second lien priority of this Deed of Trust (the "PERMITTED EXCEPTIONS"). If Grantor shall pay to Lender the Loan guaranteed by the Grantor's Guaranty and if Grantor shall duly, promptly and fully perform, discharge, execute, effect, complete and comply with and abide by each and every one of the terms, covenants, conditions and agreements of the Grantor's Guaranty, this Deed of Trust, and all other Loan Documents, then this Deed of Trust and the estates and interests hereby granted and created shall cease, terminate and be null and void, and shall be discharged of record at the expense of Grantor. Grantor, for the benefit of Lender and its successors and assigns, does hereby expressly covenant and agree as follows: 1. PERFORMANCE OF GUARANTY. Grantor shall fulfill all of its obligations under the Grantor's Guaranty, together with all interest thereon, in accordance with the terms, covenants and conditions of the Grantor's Guaranty promptly at the times, at the place and in the manner that said principal and interest shall become due under the Grantor's Guaranty, and shall promptly and punctually pay all other sums required to be paid by Grantor pursuant to the terms, covenants and conditions of the Grantor's Guaranty, this Deed of Trust, the Indemnity Assignment of Leases, Rents and Profits of even date herewith (which Indemnity Assignment of Leases, Rents and Profits, as the same may be extended, renewed, replaced, amended, restated or otherwise modified, is hereinafter referred to as the "ASSIGNMENT"), and all other documents and instruments executed as further evidence of, as additional security for or executed in connection with the Loan evidenced by the Note, guaranteed by the Grantor's Guaranty and secured by this Deed of Trust (collectively, the "LOAN DOCUMENTS"). 2. PERFORMANCE OF OTHER OBLIGATIONS. Grantor shall perform, comply with and abide by, and cause Borrower to perform, comply with and abide by, each and every one of the terms, covenants, conditions and agreements contained and set forth in the Note, the Grantor's Guaranty, this Deed of Trust, and the other Loan Documents, shall comply with all Laws (hereafter defined) and shall perform all of its obligations under any term, covenant, condition, restriction or agreement of record affecting the Property, and to insure that at all times the Property constitutes one or more legal lots capable of being conveyed without violation of any subdivision or platting laws, codes, ordinances, statutes, rules, regulations, or other laws relating to the division, separation or subdivision of real property. Germantown, Maryland 8 3. PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY; HAZARDOUS WASTE. (a) Grantor shall keep all Improvements now existing or hereafter erected on the Real Property in good order and repair, only to be used for the Existing Use, and not to do or permit any waste, impairment or deterioration thereof or thereon, nor to alter, remove or demolish any of the Improvements or any Fixtures and Personal Property attached or appertaining thereto, without the prior written consent of Lender, nor to initiate, join in or consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the uses which may be made of the Property or any part thereof, nor to do or permit any other act whereby the Property shall become less valuable, be used for purposes contrary to applicable Law or be used in any manner which will increase the premium for or result in a termination or cancellation of the insurance policies hereinafter required to be kept and maintained on the Property. In furtherance of, and not by way of limitation upon, the foregoing covenant, Grantor shall effect such repairs as Lender may reasonably require, and from time to time make all needful and proper replacements so that the Improvements, Appurtenances, Fixtures and Personal Property will, at all times, be in good condition, fit and proper for the respective purposes for which they were originally erected or installed. In connection with the making of such repairs, Grantor shall use contractors who are properly licensed, who carry workers' compensation insurance and appropriate liability insurance, who generally have a good reputation for completing their work in a neat, prompt and workmanlike manner, and use only new or re-manufactured goods of a quality as good or better than that originally used on the Property. As provided herein, Grantor shall insure that no liens are filed against the Property that relate in any way to the repair work provided for herein. For so long as that certain Lease of the Property (the "BORDERS LEASE") dated November 14, 2002, between Grantor, as landlord, and Border's, Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with Borders as the tenant thereunder and Grantor is diligently enforcing the obligations of Borders thereunder, Grantor shall be deemed to be in compliance with the requirements of this subparagraph. Grantor at all times shall keep the Property and ground water of the Property free of Hazardous Materials (as hereinafter defined) to the extent required by applicable governmental agencies and free of any liens arising in connection therewith. Grantor shall not and shall not knowingly permit its tenants or any third party requiring the consent of Grantor to enter the Property, to use, generate, manufacture, treat, store, release, threaten release, transport on or over, emit or dispose of Hazardous Materials in, on, over, under or about the Property including the ground water of the Property in violation of any federal, regional, state or local law, code, ordinance, statute, rule, regulation, decision or order currently in existence or hereafter enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Grantor shall give Lender prompt Written Notice (as hereinafter defined) of any claim by any person, entity, or governmental agency that a significant release or disposal of Hazardous Materials has occurred in, on, over, under or about the Property, including the ground water of the Property, in Germantown, Maryland 9 excess of those permitted by the Hazardous Waste Laws, whether caused by the Grantor, any tenant or any third party. Grantor, through its professional engineers and at Grantor's sole cost, shall promptly and thoroughly investigate any suspected release of Hazardous Materials in, on, over, under or about the Property, including the ground water of the Property. Grantor shall forthwith remove, repair, remediate, clean up, and/or detoxify any Hazardous Materials found in, on, over, under or about the Property or in the ground water of the Property to the extent such actions are required by any applicable Hazardous Waste Laws, and whether or not Grantor was responsible for the existence of the Hazardous Materials in, on, over, under or about the Property or the ground water of the Property. "HAZARDOUS MATERIALS" shall include, but not be limited to, substances defined as "hazardous substances," "hazardous materials," or "toxic substances" under any Hazardous Waste Laws. (b) In addition, Grantor shall not incorporate any underground storage tanks into the Real Property without the prior written consent of Lender, and shall insure that all tanks currently on the Real Property comply with current Hazardous Waste Laws and underground storage tank regulations and are properly registered. Grantor hereby agrees to indemnify and defend Lender and Trustees and hold Lender and Trustees harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses, fines, fees, suits, actions, debts, obligations, and claims of any and every kind whatsoever, including Reasonable Attorneys' Fees (collectively, "LOSSES") paid, incurred or suffered by, or asserted against, Lender or Trustees for, with respect to, or as a direct or indirect result of, the presence in, on, over, under or about, or the escape, seepage, leakage, spillage, discharge, emission or release from, the Property of any Hazardous Materials (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Hazardous Waste Laws), regardless of the source of origination and whether or not caused by, or within the control of, Grantor and including any claims of lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(b) and similar provisions in this Deed of Trust and the other Loan Documents concerning Hazardous Materials shall survive repayment of the Note, the Grantor's Guaranty, and satisfaction of this Deed of Trust; provided, however, Grantor shall have no liability under this Section 3(b) regarding Hazardous Materials if either (i) the Property becomes contaminated subsequent to Lender's acquisition of the Property by foreclosure, acceptance by Lender of a deed in lieu thereof, or subsequent to any transfer of ownership of the Property which was approved or authorized by Lender in writing, pursuant to this Deed of Trust, provided that such transferee assumes in writing all of the obligations of Grantor with respect to Hazardous Materials pursuant to the Loan Documents, or (ii) at such time Grantor provides Lender with an environmental assessment report acceptable to Lender, in Lender's sole discretion, showing the Property to be free of Hazardous Materials and not in violation of any Hazardous Waste Laws. The burden of proof under this Section 3(b) with Germantown, Maryland 10 regard to establishing the date upon which any Hazardous Materials was released in, on, over, under or about the Property shall be upon Grantor. (c) Grantor at all times shall maintain the Property in full compliance with all federal, state, county, regional or local laws, codes, ordinances, rules, regulations, decisions and orders currently in existence or hereafter enacted or rendered, governing accessibility for the disabled, including but not limited to: The Architectural Barriers Act of 1968; The Rehabilitation Act of 1973; The Fair Housing Act of 1988; The Americans with Disabilities Act; and The Maryland Elimination of Architectural Barriers Act (collectively, the "ACCESSIBILITY LAWS"). Grantor hereby agrees to indemnify and defend Lender and hold Lender harmless from and against any and all Losses paid, incurred or suffered by, or asserted against Lender for, with respect to, or as a direct or indirect result of, the non-compliance of the Property with the Accessibility Laws whether or not caused by, or within the control of, Grantor, and including any claims of lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(c) and similar provisions in this Deed of Trust and the other Loan Documents concerning Accessibility Laws shall survive repayment of the Note and satisfaction of this Deed of Trust; provided, however, Grantor shall not be liable under this Section 3(c) for compliance with any Accessibility Laws if such Accessibility Laws first become effective, or such violations result from alterations or improvements to the Property that are performed subsequent to Lender's acquisition of the Property by foreclosure or acceptance of a deed in lieu thereof or subsequent to any transfer which was approved or authorized by Lender pursuant to this Deed of Trust, provided that such transferee assumes in writing all obligations pertaining to the Accessibility Laws pursuant to this Deed of Trust and the other Loan Documents. The burden of proof under this Section 3(c) with regard to establishing the date upon which such non-compliance with any Accessibility Laws occurred at the Property shall be upon Grantor. (d) Lender, and/or its agents, shall have the right and shall be permitted, subject to the rights of Borders under the Borders Lease, but shall not be required, at all reasonable times, to enter upon and inspect the Property to insure compliance with the foregoing covenants, and any and all other terms, covenants, conditions and agreements set forth in this Deed of Trust. 4. PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Grantor shall pay, or cause to be paid, all taxes, assessments and other charges as already levied or assessed, or that may be hereafter levied or assessed, upon or against the Property, when the same shall become due and payable according to Law, before delinquency, and before any interest or penalty shall attach thereto, and to deliver official receipts evidencing the Germantown, Maryland 11 payment of the same to Lender not later than thirty (30) days following the payment of the same. Grantor shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, the proposed assessment of ad valorem taxes or special assessments by governmental authorities having jurisdiction over the Property; provided, however, Grantor shall give Written Notice of its intent to bring such an action to Lender, and Lender may, in its sole discretion, require Grantor to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Deed of Trust) as a result of Grantor's act. 5. PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Grantor shall immediately pay and discharge from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, realtors, brokers and others which, if unpaid, might result in, or permit the creation of, a lien, charge or encumbrance upon the Property or any part thereof, or on the Rents, arising therefrom and, in general, to do or cause to be done everything necessary so that the lien of this Deed of Trust shall be fully preserved, at the sole cost of Grantor, without expense to Lender. Grantor shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, mechanics', materialmens' and other such liens filed against the Property; provided however, that Grantor shall give Written Notice to Lender of its intent to bring such action, and Lender may, in Lender's sole discretion, require Grantor to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Deed of Trust) as a result of Grantor's act. 6. PAYMENT OF JUNIOR ENCUMBRANCES. Grantor shall permit no default or delinquency under any other lien, imposition, charge or encumbrance against the Property, even though junior and inferior to the lien of this Deed of Trust; provided however, the foregoing shall not be construed to permit any such additional lien or encumbrance against the Property, other than the Permitted Exceptions. 7. PAYMENT OF MORTGAGE TAXES. Grantor shall pay any and all taxes which may be levied or assessed directly or indirectly upon the Note and/or this Deed of Trust (except for income taxes payable by Lender) or the Loan, without regard to any Law which may be hereafter enacted imposing payment of the whole or any part thereof upon Lender, its successors or assigns. Upon violation of this covenant, or upon the rendering by any court of competent jurisdiction of a decision that such a covenant by Grantor is legally inoperative, or if any court of competent jurisdiction shall render a decision that the rate of said tax when added to the rate of interest provided for in the Note exceeds the then maximum rate of interest allowed by Law, then, and in any such event, the debt hereby secured shall, at the option of Lender, its successors or assigns, become immediately due and payable, anything contained in this Deed of Trust or in the Grantor's Guaranty notwithstanding, without the imposition of a Prepayment Premium (as defined in the Note). The additional amounts which may become due and payable hereunder shall become a part of the Loan secured by this Deed of Trust. Germantown, Maryland 12 8. HAZARD INSURANCE. Grantor shall continuously, during the term of this Deed of Trust, keep the Improvements, Appurtenances, and Fixtures and Personal Property, now or hereafter existing, erected, installed and located in or upon the Real Property, insured with extended coverage insurance against loss or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine subsidence, acts of terrorism, and such other hazards, casualties, contingencies and perils including, without limitation, other risks insured against by persons operating like properties in the locality of the Property, or otherwise deemed necessary or advisable by Lender or any Rating Agency (as hereinafter defined), on such forms and with such deductibles as may be required by Lender or any Rating Agency, covering the Property in the amount of the full replacement cost thereof, (without taking into account any depreciation) less excavating and foundation costs, and covering all loss or abatement of rental or other income, without a provision for co-insurance, in an amount equal to the scheduled rental income of the Property for at least twelve (12) months, or if applicable, business interruption insurance in an amount sufficient to pay debt service on the Note, operating expenses, taxes and insurance on the Property for a period of twelve (12) months, and covering loss by flood (if the Property lies in a Special Flood Hazard Area as designated on the Department of Housing and Urban Development's Maps, or other flood prone designation) in an amount equal to the outstanding principal balance of the Loan or such other amount as approved by Lender, and earthquake insurance with a deductible amount of no more than ten percent (10%) of the policy amount if, in the judgment of Lender's inspecting architect, the Property lies in an area of anticipated significant seismic activity, and "Ordinance or Law Coverage" or "Enforcement" endorsements in amounts satisfactory to Lender if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses or the ability to rebuild the Improvements is restricted or prohibited, and comprehensive boiler and machinery insurance (without exclusion for explosion), if applicable, in amounts as shall be reasonably required by Lender or any Rating Agency and covering all boilers or other pressure vessels, machinery and equipment located at or about the Property (including, without limitation, electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping). All such insurance shall be carried with a company or companies licensed to do business in the State, which is acceptable to Lender, which company or companies shall have a rating at the time this Deed of Trust is executed equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Each such policy of insurance shall contain a noncontributing loss payable clause in favor of and in a form acceptable to Lender, and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, non-renew, cancel or terminate the policy or policies, or the expiration of such policies of insurance, or the exclusion of any individual risk such as acts of terrorism. If the insurance required under this Section 8 or any portion thereof is maintained pursuant to a blanket policy, Grantor shall furnish to Lender a certified copy of such policy, together with an original Evidence of Insurance Certificate (Acord Form 27) for Germantown, Maryland 13 hazard insurance indicating that Lender is an additional insured under such policy in regard to the Property and showing the amount of coverage apportioned to the Property, which coverage shall be in an amount sufficient to satisfy the requirements hereof. Not less than fifteen (15) days prior to the expiration dates of each policy required of Grantor hereunder, Grantor will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Deed of Trust or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Grantor, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. For so long as the Borders Lease remains in effect with Borders as the tenant thereunder, then to the extent that Borders self-insures to satisfy its insurance obligations under the Borders Lease, Lender shall accept such self-insurance as satisfying the obligation of Grantor to provide insurance under this Section 8, provided that (i) Borders, or the guarantor of the Borders Lease, Boarders Group, Inc., maintains a minimum net worth of not less than Two Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance otherwise satisfies the requirements of this Section 8 as to the amount required to be maintained by Borders, and (iii) Grantor provides to Lender written verification of such coverage in form and substance reasonably acceptable to Lender. Notwithstanding the foregoing, Lender shall have the right require Grantor to maintain in effect a separate policy of liability insurance with respect to the Property meeting the requirements of Section 9 of this Deed of Trust. In the event of loss covered by insurance maintained by Grantor with respect to the Property, including, without limitation, insurance covering hazards, casualties, contingencies and perils for which insurance has been required by Lender hereunder, Grantor shall give immediate notice thereof to Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an interest for Lender to, at its option, make proof of loss and/or to file a claim thereunder. Each insurance company concerned is hereby notified, authorized and directed to make payment for such loss directly to Lender, instead of to Grantor and Lender jointly, and Grantor hereby authorizes Lender to adjust and compromise any losses for which insurance proceeds are payable under any of the aforesaid insurance policies and, after deducting the costs of collection, to apply the proceeds of such insurance, at its option either: (a) to the restoration or repair of the insured Improvements, Appurtenances, and Fixtures and Personal Property, provided that, in the opinion and sole discretion of Lender, such restoration or repair is reasonably practical and, provided further, that, in the opinion and sole discretion of Lender, either: (i) the insurance proceeds so collected are sufficient to cover the cost of such restoration or repair of the damage or destruction with respect to which such proceeds were paid, or (ii) the insurance proceeds so collected are not sufficient alone to cover the cost of such restoration or repair, but are sufficient therefor when taken together with funds provided and made available by Grantor from other sources; in which event Lender shall make such insurance proceeds available to Grantor for the purpose of effecting such restoration or repair; Germantown, Maryland 14 but Lender shall not be obligated to see to the proper application of such insurance proceeds nor shall the amount of funds so released or used be deemed to be payment of or on account of the Loan; or (b) to the reduction of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured, in which event such proceeds shall be applied at par against the Loan and the monthly payment due on account of such Loan shall be reduced accordingly as calculated by Lender. None of such actions taken by Lender shall be deemed to be or result in a waiver or impairment of any equity, lien or right of Lender under and by virtue of this Deed of Trust, nor will the application of such insurance proceeds to the reduction of the Loan serve to cure any default in the payment thereof. In the event of foreclosure of this Deed of Trust or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Grantor in and to any insurance policies then in force including any rights to unearned premiums and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Grantor's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Grantor's sole expense. Notwithstanding anything set forth in this Section 8 to the contrary, in the event of loss or damage to the Property by fire or other casualty covered by insurance maintained by Grantor with respect to the Property, including, without limitation, insurance which has been required by Lender hereunder and provided by Grantor, and the amount of such loss or damage does not exceed twenty-five percent (25%) of the unpaid principal balance of the Note, Lender hereby agrees to allow the proceeds of insurance to be used for the restoration of the Property and to release such insurance proceeds to Grantor as such restoration progresses, provided: (a) Neither Grantor nor Borrower is in default under any of the terms, covenants and conditions of this Deed of Trust, the Grantor's Guaranty, the Note or any of the other Loan Documents; (b) The Improvements, after such restoration, shall be at least eighty percent (80%) leased pursuant to leases approved in writing by Lender; (c) The plans and specifications for the restoration of the Property are approved in writing by Lender in advance; (d) At all times during such restoration, Grantor has deposited with Lender funds which, when added to the insurance proceeds received by Lender, are sufficient to complete the restoration of the Property in accordance with the approved plans and specifications, and all applicable building codes, zoning ordinances, regulations and Germantown, Maryland 15 Accessibility Laws, and further, that the funds retained by Lender are sufficient to complete the restoration of the Property as certified to Lender by Lender's inspecting architect/engineer; (e) Grantor provides suitable completion, payment and performance bonds, builders' all risk insurance, and all necessary licenses and permits for such restoration in form and amount acceptable to Lender; (f) The insurer under such policies of fire or other casualty insurance does not assert any defense to payment under such policies against Lender, Grantor, any tenant, or third party of Grantor with regard to the Property; (g) Lender shall have the option, upon the completion of such restoration of the Property, to apply any surplus insurance proceeds remaining after the completion of such restoration, at par, to the reduction of the outstanding principal balance of the Note; notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured; (h) The funds held by Lender shall be disbursed no more often than once per month and in not more than five (5) increments of not less than Fifty Thousand Dollars ($50,000) each, except the final disbursement of such funds which may be in an amount less than Fifty Thousand Dollars ($50,000); (i) Lender's obligation to make any such disbursement shall be conditioned upon Lender's receipt of written certification from Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender by Grantor) that all construction and work for which such disbursement is requested has been completed in accordance with the approved plans and specifications and in accordance with all applicable building codes, zoning ordinances and all other Laws and, further, that Grantor has deposited with Lender sufficient funds to complete such restoration in accordance with Section 8(d); (j) In the reasonable judgment of the Lender, the Property can be restored within six months after insurance proceeds are made available and at least six months prior to the Maturity Date (as defined in the Note) to an economic unit not less valuable (including an assessment by Lender of the impact of the termination of any Occupancy Leases due to such casualty) and not less useful than the same was prior to the casualty, and after such restoration will adequately secure the outstanding balance of the Loan; and (k) Lender shall be entitled to require and to impose such other conditions to the release of such funds as would be customarily or reasonably be required and imposed by institutional mortgage lenders for a project of similar nature and cost. Germantown, Maryland 16 In the event of a casualty, provided that Grantor is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 8 to the contrary, Lender shall make insurance proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. 9. LIABILITY INSURANCE. Grantor shall carry and maintain such commercial general liability insurance as may from time to time be required by Lender or any Rating Agency, taking into consideration the type of property being insured and the corresponding liability exposure, on forms, with deductibles, in amounts and with such company or companies licensed to do business in the State and as may be acceptable to Lender. All such commercial general liability insurance shall be carried with a company or companies which have and maintain a rating equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and all renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with a Certificate of Insurance (Acord Form 25S) and receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Such policy or policies of insurance shall name Lender as an additional insured and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, cancel, non-renew, or terminate the policy or policies or the expiration of such policy or policies of insurance, or the exclusion of any individual risk such as acts of terrorism. Not less than fifteen (15) days prior to the expiration dates of each policy or policies required of Grantor hereunder, Grantor will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Deed of Trust or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Grantor, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Grantor's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Grantor's sole expense. 10. COMPLIANCE WITH LAWS. (a) Grantor shall observe, abide by and comply with all federal, regional, state and local laws, codes, ordinances, statutes, rules, regulations, decisions, orders, requirements or decrees relating to the Property enacted, promulgated or issued by any federal, state, county or local governmental or quasi-governmental authority or any agency or subdivision thereof having jurisdiction over Grantor or the Property, which now or hereafter affect Grantor or the Property, including Hazardous Waste Laws and Accessibility Laws (collectively, the "LAWS"), and to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning, variances, special exceptions and nonconforming uses), privileges, Germantown, Maryland 17 franchises and concessions which are applicable to the Property, or which have been granted to or contracted for by Grantor in connection with any existing, presently contemplated or future uses of the Property. (b) Grantor shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Grantor's Guaranty, this Deed of Trust and the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Grantor shall deliver to Lender such certifications or other evidence from time to time throughout the term of this Deed of Trust, as requested by Lender in its sole discretion, that (i) Grantor is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Grantor is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true: (1) Equity interests in Grantor are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of each outstanding class of equity interests in Grantor are held by "benefit plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Grantor qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. 11. MAINTENANCE OF PERMITS. Grantor shall obtain, keep and constantly maintain in full force and effect during the entire term of this Deed of Trust, all certificates, licenses and permits necessary to keep the Property operating for the Existing Use and, except as specifically provided for in this Deed of Trust, not to assign, transfer or in any manner change such certificates, licenses or permits without first receiving the written consent of Lender. 12. OBLIGATIONS OF GRANTOR AS LESSOR. (a) Grantor shall perform every obligation of Grantor (as the landlord) and enforce every obligation of the tenant in any and every lease, license or other occupancy agreement of or affecting the Property or any part thereof (the "OCCUPANCY LEASES"), and not to modify, alter, waive or cancel any such Occupancy Leases or any part thereof or rights thereunder, without the prior written consent of Lender (but such consent shall not be required for such action as to Occupancy Leases of three thousand (3,000) square feet or less if such Germantown, Maryland 18 action is in the ordinary course of business of owning and operating the Property in a prudent and business-like manner, on then current market terms), nor collect for more than thirty (30) days in advance of the date due any Rents that may be collectible under any such Occupancy Leases and, except as provided for in this Deed of Trust, not to assign any such Occupancy Lease(s) or any such Rents relating thereto, to any party other than Lender, without the prior written consent of Lender. Grantor will notify Lender in writing of any default under any Occupancy Lease. In the event of default under any such Occupancy Lease by reason of failure of Grantor to keep or perform one or more of the covenants, agreements or conditions thereof, Lender is hereby authorized and empowered, and may, at its sole option, remedy, remove or cure any such default, and further, Lender may, at its sole option and in its sole discretion but without obligation to do so, pay any sum of money deemed necessary by Lender for the performance of said covenants, agreements and conditions, or for the curing or removal of any such default, and incur all expenses and obligations which Lender may consider necessary or reasonable in connection therewith, and Grantor shall repay on demand all such sums so paid or advanced by Lender together with interest thereon until paid at the lesser of either: (i) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (ii) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; all of such sums, if unpaid, shall be added to and become part of the Loan. (b) All such Occupancy Leases hereafter made shall be subject to the approval of Lender and: (i) shall be at competitive market rental rates then prevailing in the geographic area for projects used for the Existing Use comparable to the Property; (ii) shall have lease terms of not less than three years; and (iii) at Lender's option, shall be superior or subordinate in all respects to the lien of this Deed of Trust. Provided, however, that Lender shall not require approval in advance of any Occupancy Leases which conform to the Grantor's Form Lease (as hereinafter defined) as previously approved by Lender, except as set forth below. Neither the right nor the exercise of the right herein granted unto Lender to keep or perform any such covenants, agreements or conditions as aforesaid shall preclude Lender from exercising its option to cause the whole Loan to become immediately due and payable by reason of Grantor's default in keeping or performing any such covenants, agreements or conditions. (c) Lender has approved a form of Occupancy Lease to be used by Grantor in connection with the Property (the "FORM LEASE"). Grantor shall not, without the prior written consent of Lender, modify or alter the Form Lease in any material respect. In addition, Grantor shall not, without the prior written consent of Lender, surrender, terminate, modify or alter, either orally or in writing, any Occupancy Lease now existing or hereafter made with any Major Tenant (as hereinafter defined) for all or part of the Property, permit an assignment or sublease of any such Occupancy Lease, or request or consent to the subordination of any Occupancy Lease to any lien subordinate to this Deed of Trust. Grantor shall furnish Lender with copies of all executed Occupancy Leases of all or any part of the Germantown, Maryland 19 Property now existing or hereafter made, and Grantor shall assign to Lender (which assignment shall be in form and content acceptable to Lender), as additional security for the Grantor's Guaranty and the Loan, all Occupancy Leases now existing or hereafter made for all or any part of the Property. (d) Notwithstanding the foregoing approval by Lender of Grantor's Form Lease, Lender hereby specifically reserves the right to approve all prospective tenants under all Occupancy Leases hereafter proposed to be made if either: (i) the term thereof, excluding options to renew the same, exceeds five years; or (ii) the net rentable area to be occupied thereunder, including expansion options, exceeds ten percent (10%) of the net leasable area of each of the buildings comprising the Improvements (the tenants under such leases being hereinafter referred to as "MAJOR TENANTS"). Grantor shall notify Lender in writing of all prospective Major Tenants, and shall deliver to Lender, at Grantor's sole cost and expense, a copy of the prospective Major Tenant's current financial statement and the most recent Dun & Bradstreet credit report on said prospective Major Tenant. The financial statement delivered to Lender hereunder shall be certified as true and correct by the Major Tenant, or, if available, by a certified public accountant. (e) In no event shall Grantor exercise any right to relocate any tenant outside the Property pursuant to any right set forth in an Occupancy Lease without the prior written consent of Lender. 13. MAINTENANCE OF PARKING & ACCESS; PROHIBITION AGAINST ALTERATION; SEPARATE TAX LOT. (a) Grantor shall construct, keep and constantly maintain, as the case may be, all curbs, drives, parking areas and the number of parking spaces heretofore approved by Lender, or heretofore or hereafter required by any Laws or any governmental body, agency or authority having jurisdiction over Grantor or the Property, and as required by the terms of the Occupancy Leases, and not to alter, erect, build or construct upon any portion of the Property, any building, structure or improvement of any kind whatsoever, the erection, building or construction of which has not been previously approved by Lender in writing, which approval shall be at the sole discretion of Lender. (b) Grantor shall cause the Property to remain separately assessed for real estate tax purposes as a separate tax lot or lots. 14. EXECUTION OF ADDITIONAL DOCUMENTS. Grantor shall do, make, execute, acknowledge, witness and deliver all deeds, conveyances, mortgages, deeds of trust, assignments, estoppel certificates, subordination non-disturbance and attornments, notices of assignments, transfers, assurances, security agreements, financing statements and renewals thereof, and all other instruments or other acts necessary, as Lender shall from time to time Germantown, Maryland 20 require for the purpose of better assuring, conveying, assigning, transferring, securing and confirming unto Lender the Property and rights hereby encumbered, created, conveyed, assigned or intended now or hereafter so to be encumbered, created, conveyed or assigned, or which Grantor may now be or may hereafter become bound to encumber, create, convey or assign to Lender, or for the purpose of carrying out the intention or facilitating the performance of the terms of this Deed of Trust, or for filing, registering or recording this Deed of Trust, and to pay all filing, registration or recording fees and all taxes, costs and other expenses, including Reasonable Attorneys' Fees, incident to the preparation, execution, acknowledgment, delivery and recordation of any of the same. By signing this Deed of Trust, Grantor authorizes Lender to file such financing statements, with or without the signature of Grantor, as Lender may elect, as may be necessary or desirable to perfect the lien of Lender's security interest in the Fixtures and Personal Property. Without limiting any other provision herein, Grantor hereby authorizes Lender to file one or more financing statements and any renewal or continuation statements thereof, describing the Property and the proceeds of the Property, including, without limitation, a financing statement covering "all assets of Grantor all proceeds therefrom, and all rights and privileges with respect thereto." Grantor further authorizes Lender to file, with or without any additional signature from Grantor, as Lender may elect, such amendments and continuation statements as Lender may deem necessary or desirable from time to time to perfect or continue the lien of Lender's security interest in the Fixtures and Personal Property. Grantor hereby ratifies any financing statements that may have been filed by Lender in advance of the date hereof to perfect Lender's security interest in the Fixtures and Personal Property. 15. AFTER-ACQUIRED PROPERTY SECURED. Grantor shall subject to the lien of this Deed of Trust all right, title and interest of Grantor in and to all extensions, improvements, betterments, renewals, substitutions and replacements of, and all additions and appurtenances to, the Property hereinabove described, hereafter acquired by or released to Grantor, or constructed, assembled or placed by Grantor on the Real Property, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, encumbrance, conveyance, assignment or other act by Grantor, as fully, completely and with the same effect as though now owned by Grantor and specifically described herein, but at any and all times, Grantor will execute and deliver to Lender any and all such further assurances, mortgages, deeds of trust, conveyances, security agreements, financing statements or assignments thereof or security interests therein as Lender may reasonably require for the purpose of expressly and specifically subjecting the same to the lien of this Deed of Trust. 16. PAYMENTS BY LENDER ON BEHALF OF GRANTOR. Grantor shall make payment of any taxes, assessments or public charges on or with respect to the Property before the same shall become delinquent, or to make payment of any insurance premiums or other charges, impositions, or liens herein or elsewhere required to be paid by Grantor, or if Germantown, Maryland 21 Grantor shall fail so to do, then Lender, at its sole option, but without obligation to do so, may make payment or payments of the same and also may redeem the Property from tax sale without any obligation to inquire into the validity of such taxes, assessments, charges, impositions or liens. In the case of any such payment by Lender, Grantor agrees to reimburse Lender, upon demand therefor, the amount of such payment and of any fees and expenses attendant in making the same, together with interest thereon at the lesser of either: (a) the highest rate of interest then allowed by the Laws of the State or, if controlling, the Laws of the United States, or (b) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; and until paid such amounts and interest shall be added to and become part of the Loan to the same extent that this Deed of Trust secures the repayment of the Loan. In making payments authorized by the provisions of this Section 16, Lender may do so whenever, in Lender's sole judgment and discretion, such advance or advances are necessary or desirable to protect the full security intended to be afforded by this Deed of Trust. Neither the right nor the exercise of the rights herein granted to Lender to make any such payments as aforesaid shall preclude Lender from exercising its option to cause the Loan to become immediately due and payable by reason of Grantor's default in making such payments as hereinabove required. 17. FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this Deed of Trust, Grantor shall deposit with Lender, together with and in addition to each monthly payment due on account of the Loan, an amount equal to one-twelfth (1/12th) of the annual total of such taxes, assessments, insurance premiums and other charges (all as estimated by Lender in its sole discretion) so that, at least thirty (30) days prior to the due date thereof, Lender shall be able to pay in full all such taxes, assessments, insurance premiums and other charges as the same shall become due. Lender may hold the sums so deposited without paying interest, commingle same with its general funds and/or apply the same to the payment of said taxes, assessments, insurance premiums or other charges as they become due and payable. If at any time the funds so held by Lender are insufficient to pay such taxes, assessments, insurance premiums or other charges as they become due and payable, Grantor shall immediately, upon Written Notice and demand by Lender, deposit with Lender the amount of such deficiency. The failure on the part of Grantor to do so shall entitle Lender, at Lender's sole option, to make such payments in accordance with the rights and pursuant to the conditions elsewhere provided in this Deed of Trust. Grantor hereby grants to Lender a security interest in all funds deposited with Lender, and such funds are hereby pledged by Grantor to Lender for the purpose of securing all indebtedness and obligations secured by this Deed of Trust. Whenever any default exists under this Deed of Trust, Lender may, at Lender's sole option but without an obligation so to do, apply any funds so held by Lender pursuant to this Section 17 toward the payment of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured, in such order and manner of application as Lender may elect. Germantown, Maryland 22 18. CONDEMNATION; EMINENT DOMAIN. All claims and rights of action for, and all awards and other compensation heretofore or hereafter made to Grantor and all subsequent owners of the Property in any taking by eminent domain, recovery for inverse condemnation or by deed in lieu thereof, whether permanent or temporary, of all or any part of the Property or any easement or any appurtenance thereto, including severance and consequential damages and change in grade of any way, street, avenue, road, alley, passage or public place, are hereby assigned to Lender. Grantor hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, and authorizes, directs and empowers Lender, at the option of Lender as said attorney-in-fact, on behalf of Grantor, its successors and assigns, to adjust or compromise the claim for any such award, and alone to collect and receive the proceeds thereof, to give proper receipts and acquittances therefor and, after deducting any expenses of collection, Lender shall at its sole option either: (a) apply the net proceeds as a credit upon any portion of the Loan, as selected by Lender, notwithstanding the fact that the amount owing thereon may not then be due and payable, or that the Loan is otherwise adequately secured. In the event Lender applies such awards to the reduction of the outstanding Loan guaranteed by the Grantor's Guaranty, such proceeds shall be applied at par, and the monthly installments due and payable under the Note shall be reduced accordingly as calculated by Lender; however no such application shall serve to cure an existing default in the payment of the Note or the Grantor's Guaranty; or (b) hold said proceeds without any allowance of interest, and make the same available for restoration or rebuilding of the Improvements. In the event that Lender makes said proceeds available to reimburse Grantor for the cost of the restoration or rebuilding of the Improvements on the Real Property, such proceeds shall be made available in the manner and under the same conditions as required under Section 8 hereof. If the proceeds are made available by Lender to reimburse Grantor for the cost of said restoration or rebuilding, any surplus which may remain out of said award after payment of such cost of restoration or rebuilding, shall be applied on account of the Loan at par notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured. In the event of a taking or condemnation, provided that Grantor is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 19 to the contrary, Lender shall make condemnation proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. Grantor further covenants and agrees to give Lender immediate notice of the actual or threatened commencement of any proceedings under eminent domain, and to deliver to Lender copies of any and all papers served in connection with any such proceedings. Grantor further covenants and agrees to make, execute and deliver to Lender, at any time or times, upon Germantown, Maryland 23 request, free, clear and discharged of any encumbrance of any kind whatsoever, any and all further assignments and/or other instruments deemed necessary by Lender for the purpose of validly and sufficiently assigning all such awards and other compensation heretofore or hereafter made to Lender (including the assignment of any award from the United States government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for payment thereof). It shall be a default hereunder if either: (i) any part of any of the Improvements situated on the Real Property shall be condemned by any governmental authority having jurisdiction; or (ii) lands constituting a portion of the Real Property shall be condemned by any governmental authority having jurisdiction, such that the remaining Property is in violation of applicable parking, zoning, platting, or other ordinances, or fails to comply with the terms of the Occupancy Leases with Major Tenants. In either of said events, Lender shall be entitled to exercise any or all remedies provided or referenced in this Deed of Trust or the other Loan Documents, including the application of condemnation proceeds to the outstanding principal balance of the Note at par, and the right to accelerate the maturity date of the Note and require payment in full without the imposition of a Prepayment Premium. 19. COSTS OF COLLECTION. In the event that the Note or the Grantor's Guaranty is placed in the hands of an attorney for collection, or in the event that Lender shall become a party either as plaintiff or as defendant, in any action, suit, appeal or legal proceeding (including, without limitation, foreclosure, condemnation, bankruptcy, administrative proceedings or any proceeding wherein proof of claim is by law required to be filed), hearing, motion or application before any court or administrative body in relation to the Property or the lien and security interest granted or created hereby or herein, or for the recovery or protection of the Loan or the Property, or for the foreclosure of this Deed of Trust, or for the enforcement of the terms and conditions of the Loan Documents, Grantor shall indemnify, save, defend and hold Lender harmless from and against any and all Losses incurred by Lender on account thereof, and Grantor shall repay, on demand, all such Losses, together with interest thereon until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums, if unpaid, shall be added to and become a part of the Loan. 20. DEFAULT RATE. Any sums not paid when due, whether maturing by lapse of time or by reason of acceleration under the provisions of the Note, the Grantor's Guaranty, this Deed of Trust, or any of the other Loan Documents, and whether principal, interest or money owing for advancements pursuant to the terms of this Deed of Trust or any other Loan Document, shall bear interest until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums shall be added to and become a part of the Loan. Germantown, Maryland 24 21. SAVINGS CLAUSE. Notwithstanding any provisions in the Note, the Grantor's Guaranty, or in this Deed of Trust to the contrary, the total liability for payments in the nature of interest, including but not limited to Prepayment Premiums, default interest and late payment charges, shall not exceed the limits imposed by the Laws of the State or, if controlling, the Laws of the United States, relating to maximum allowable charges of interest. Lender shall not be entitled to receive, collect or apply, as interest on the Loan, any amount in excess of the maximum lawful rate of interest permitted to be charged by any Laws. In the event Lender ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be applied to reduce the unpaid principal balance of the Loan evidenced by the Note and guaranteed by the Grantor's Guaranty. If the unpaid principal balance of such Loan has been paid in full, any remaining excess shall be forthwith returned to Grantor. 22. BANKRUPTCY, REORGANIZATION OR ASSIGNMENT. (a) It shall be a default hereunder if Borrower or Grantor or any general partner or managing member of Borrower or Grantor shall: (a) elect to dissolve or liquidate its business organization or wind up its business affairs without receiving the prior written approval of Lender; (b) consent to the appointment of a receiver, trustee or liquidator of all or a substantial part of its assets; (c) be adjudicated as bankrupt or insolvent, or file a voluntary petition in bankruptcy, or admit in writing its inability to pay its debts as they become due; (d) make a general assignment for the benefit of creditors; (e) file a petition under or take advantage of any insolvency law; (f) file an answer admitting the material allegations of a petition filed against Borrower or Grantor or any general partner or managing member of Borrower or Grantor in any bankruptcy, reorganization or insolvency proceeding, or fail to cause the dismissal of such petition within thirty (30) days after the filing of said petition; (g) take action for the purpose of effecting any of the foregoing; or (h) if any order, judgment or decree shall be entered upon an application of a creditor of Borrower or Grantor or any general partner or managing member of Borrower or Grantor by a court of competent jurisdiction approving a petition seeking appointment of a receiver or trustee of all or a substantial part of Borrower's or Grantor's assets or any of Borrower's or Grantor's general partner's or managing member's assets and such order, judgment or decree shall continue unstayed and in effect for a period of thirty (30) days. (b) Grantor covenants and agrees that it has not and shall not: (i) engage in any business or activity other than the acquisition, ownership, operation and maintenance of the Property, and activities incidental thereto; (ii) acquire or own any material asset other than (1) the Property, and (2) such incidental Fixtures and Personal Property as may be necessary for the operation of the Property; Germantown, Maryland 25 (iii) merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent; (iv) fail to preserve its existence as an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Grantor's Governing Documents (as hereafter defined); (v) own any subsidiary or make any investment in or acquire the obligations or securities of any other person or entity without the consent of Lender; (vi) commingle its assets with the assets of any of its partner, members, shareholders, affiliates, or of any other person or entity or transfer any assets to any such person or entity other than distributions on account of equity interests in the Grantor permitted hereunder and properly accounted for; (vii) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation, other than the Loan and the Affiliate Loans), other than the Loan, except unsecured trade and operational debt incurred with trade creditors in the ordinary course of its business of owning and operating the Property in such amounts as are normal and reasonable under the circumstances, provided that such debt is not evidenced by a note and is paid when due and provided in any event the outstanding principal balance of such debt shall not exceed at any one time 1% of the outstanding Loan. Grantor shall not be deemed in default of the foregoing restrictions by virtue of any guaranty delivered by Grantor with respect to the Affiliate Loans; (viii) allow any person or entity to pay its debts and liabilities (except the Borrower or a Guarantor - or in connection with the cross-default and cross collateralization of the Affiliate Loans) or fail to pay its debts and liabilities solely from its own assets; (ix) fail to maintain its records, books of account and bank accounts separate and apart from those of the shareholders, partners, members, principals and affiliates of Grantor, the affiliates of a shareholder, partner or member of Grantor, and any other person or entity or fail to prepare and maintain its own financial statements in accordance with generally accepted accounting principles and susceptible to audit, or if such financial statements are consolidated fail to cause such financial statements to contain footnotes disclosing that the Property is actually owned by the Grantor; Germantown, Maryland 26 (x) enter into any contract or agreement with any shareholder, partner, member, principal or affiliate of Grantor, any guarantor of all or a portion of the Loan (a "GUARANTOR") or any shareholder, partner, member, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any shareholder, partner, member, principal or affiliate of Grantor or Guarantor, or any shareholder, partner, member, principal or affiliate thereof; (xi) seek dissolution or winding up, in whole or in part; (xii) fail to correct any known misunderstandings regarding the separate identity of Grantor; (xiii) hold itself out to be responsible or pledge its assets or credit worthiness for the debts of another person or entity or allow any person or entity to hold itself out to be responsible or pledge its assets or credit worthiness for the debts of the Grantor (except for a Guarantor); (xiv) make any Loan or advances to any third party, including any shareholder, partner, member, principal or affiliate of Grantor, or any shareholder, partner, member, principal or affiliate thereof, except as may be required in connection with the cross default and cross collateralization of the Affiliate Loans; (xv) fail to file its own tax returns, if required under applicable law, or to use separate contracts, purchase orders, stationary, invoices and checks, except that Grantor may file a consolidated tax return with Agree Limited Partnership for reporting purposes; (xvi) fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (1) to mislead others as to the entity with which such other party is transacting business, or (2) to suggest that Grantor is responsible for the debts of any third party (including any shareholder, partner, member, principal or affiliate of Grantor, or any shareholder, partner, member, principal or affiliate thereof); (xvii) fail to allocate fairly and reasonably among Grantor and any third party (including, without limitation, any Guarantor) any overhead for common employees, shared office space or other overhead and administrative expenses; (xviii) allow any person or entity to pay the salaries of its own employees or fail to maintain a sufficient number of employees for its contemplated business operations; Germantown, Maryland 27 (xix) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xx) share any common logo with or hold itself out as or be considered as a department or division of (1) any shareholder, partner, principal, member or affiliate of Grantor, (2) any affiliate of a shareholder, partner, principal, member or affiliate of Grantor, or (3) any other person or entity or allow any person or entity to identify the Grantor as a department or division of that person or entity; or (xxi) conceal assets from any creditor, or enter into any transaction with the intent to hinder, delay or defraud creditors of the Grantor or the creditors of any other person or entity. 23. TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It is understood by Grantor that time is of the essence hereof in connection with all obligations of Grantor herein, in the Grantor's Guaranty, the Assignment, and any of the other Loan Documents. Lender, at its sole option, may declare the Loan, as well as all other monies secured or evidenced hereby or by any of the other Loan Documents, including, without limitation, all Prepayment Premiums (to the extent permitted by the Laws of the State) and late payment charges, to be in default and forthwith due and payable, in the event: (1) Borrower or Grantor defaults in the payment of any monthly installment of the Note or the Grantor's Guaranty, whether of principal or interest, or both, or in the payment of any other sums of money referred to herein or in the Note, Grantor's Guaranty, or in any of the other Loan Documents, or in any of the documents evidencing, guarantying, or securing the repayment of the Affiliate Loans, including, but not limited to, that certain Indemnity Deed of Trust and Security Agreement executed by the Grantor as a second priority lien on the Deed of Trust Property (collectively, the "AFFILIATE LOAN DOCUMENTS"), promptly and fully when the same shall be due, without notice or demand from Lender to Grantor in regard to such Monetary Default (as hereinafter defined), and any such Monetary Default remains uncured for a period of five (5) days after Written Notice thereof has been given by Lender to Grantor, unless Lender has previously given Grantor such Written Notice for a failure to pay in the then-current Loan Year (as defined in the Note), in which event no such notice need be given and no right to cure need be afforded Grantor as to any further Monetary Default during such Loan Year. (2) Borrower or Grantor breaches or defaults on any of the terms, covenants, conditions and agreements of the Note, the Grantor's Guaranty, this Deed Germantown, Maryland 28 of Trust, or any other Loan Documents or any of the Affiliate Loan Documents; or in the event that each and every one of said terms, covenants, conditions and agreements is not otherwise either duly, promptly and fully discharged or performed, and any such Non-Monetary Default (as hereinafter defined) remains uncured for a period of thirty (30) days after Written Notice thereof has been delivered from Lender to Grantor; unless such Non-Monetary Default cannot be cured within said thirty (30) day period, in which event Borrower or Grantor shall have a reasonable period of time to complete cure, provided that action to cure such Non-Monetary Default is promptly commenced within said thirty (30) day period, and Grantor is, in Lender's sole judgment, not diminishing or impairing the value of the Property, and is diligently pursuing a cure to completion, but in no event longer than ninety (90) days. (3) Any representation or warranty of Borrower or Grantor or their respective members, general partners, principals, affiliates, agents or employees, or of any Guarantor made herein or in or in any other Loan Document or any of the Affiliate Loan Documents, in any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made. (4) Any seizure or forfeiture of the Property, or any portion thereof, or Grantor's interest therein, resulting from criminal wrongdoing or other unlawful action of Grantor, its affiliates, or any tenant in the Property under any federal, state or local law. (5) If Grantor consummates a transaction which would cause this Deed of Trust or Lender's exercise of its rights under this Deed of Trust, the Note, the Grantor's Guaranty, or the other Loan Documents to constitute a nonexempt prohibited transaction under ERISA or result in a violation of a state statute regulating governmental plans, subjecting Lender to liability for a violation of ERISA or a state statute. (6) Any default occurs in the performance of any covenant or obligation of Borrower or Grantor or any other party under any indemnity or guaranty delivered to Lender in connection with the Loan and such default continues beyond the expiration of applicable notice and cure periods. (7) Any default occurs under the Affiliate Loans which default continues beyond the expiration of applicable notice and cure periods. Upon the occurrence of any one of the above events, and at the option of Lender, the principal of and the interest accrued on the Loan and all other sums secured by this Deed of Trust and the other Loan Documents shall immediately become due and payable as if all of said Germantown, Maryland 29 sums of money were originally stipulated to be paid on such day. In addition, Lender may avail itself of all rights and remedies provided by law or equity, and may foreclose or prosecute a suit at law or in equity as if all monies secured hereby had matured prior to its institution, anything in this Deed of Trust or any of the other Loan Documents to the contrary notwithstanding. Lender shall have no obligation to give Grantor notice of, or any period to cure, any Monetary Default or any Incurable Default (as hereinafter defined) prior to exercising its rights, powers, privileges and remedies. As used herein, the term "MONETARY DEFAULT" shall mean any default which can be cured by the payment of money such as, but not limited to, the payment of principal and interest due under the Note and Grantor's Guaranty, or the payment of taxes, assessments and insurance premiums when due as provided in this Deed of Trust. As used herein, the term "NON-MONETARY DEFAULT" shall mean any default that is not a Monetary Default or an Incurable Default. As used herein, the term "INCURABLE DEFAULT" shall mean either: (i) any voluntary or involuntary sale, assignment, mortgaging, encumbering or transfer in violation of the covenants contained herein or any of the other Loan Documents; or (ii) if Borrower or Grantor, or any person or entity comprising Borrower or Grantor or any guarantor or indemnitor of the Loan, should breach any of the provisions of Section 22. 24. FORECLOSURE. Upon the occurrence of a default hereunder, Lender may institute an action to foreclose this Deed of Trust as to the amount so declared due and payable, and thereupon the Property (or any portion thereof) shall be sold according to law to satisfy and pay the same, together with all costs, expenses and allowances thereof, including, without limitation, Reasonable Attorneys' Fees. The Property may be sold in one parcel, several parcels or groups of parcels, and Lender shall be entitled to bid at the sale, and, if Lender is the highest bidder for the Property or any part or parts thereof, Lender shall be entitled to purchase the same. The failure or omission on the part of Lender to exercise the option for acceleration of maturity of the Note and foreclosure of this Deed of Trust following any default as aforesaid or to exercise any other option or remedy granted hereunder to Lender when entitled to do so in any one or more instances, or the acceptance by Lender of partial payment of the Loan, whether before or subsequent to Grantor's default hereunder, shall not constitute a waiver of any such default or the right to exercise any such option or remedy, but such option or remedy shall remain continuously in force. Acceleration of the maturity of the Note, once claimed hereunder by Lender, at the option of Lender, may be rescinded by written acknowledgment to that effect by Lender, but the tender and acceptance of partial payments alone shall not in any way either affect or rescind such acceleration of maturity, nor act as a waiver, accord and satisfaction, modification, novation or similar defense.' Germantown, Maryland 30 25. UCC REMEDIES. (a) This Deed of Trust constitutes a Security Agreement under the UCC with respect to any part of the Property that may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate, 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: (1) No financing statement covering any of the Property or any proceeds thereof is on file in any public office; and Borrower will, at its cost and expense, upon demand, furnish to Lender such further information and will execute and deliver to Lender such financing statements and other documents in form reasonably satisfactory to Lender and will do all such acts and things as Lender 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 Property as security for the Loan, subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or desirable; (2) The terms and provisions contained in this section and in Section 25(b) of this Deed of Trust shall, unless the context otherwise requires, have the meanings and be construed as provided in the UCC; (3) This Deed of Trust constitutes a security agreement and financing statement under the UCC with respect to the Property. As such, this Deed of Trust covers any portion of the Property that is personal property including all items which are to become fixtures. Borrower is the "Debtor" and Lender is the "Secured Party" (as those terms are defined and used in the UCC) insofar as this Deed of Trust constitutes a financing statement. (b) Upon the occurrence of a default, Lender may exercise its rights of enforcement with respect to the Fixtures and Personal Property under the UCC, and in conjunction with, in addition to or in substitution for those rights and remedies: (1) Written Notice mailed to Grantor as provided herein ten (10) days prior to the date of public sale of the Fixtures and Personal Property or prior to the date after which private sale of the Fixtures and Personal Property will be made shall constitute reasonable notice; (2) any sale made pursuant to the provisions of this Section shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Deed of Trust Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Germantown, Maryland 31 Fixtures and Personal Property hereunder as is required for such sale of the Deed of Trust Property under power of sale; (3) in the event of a foreclosure sale, whether made under the terms hereof, or under judgment of a court, the Fixtures and Personal Property and the Deed of Trust Property may, at the option of Lender, be sold as a whole; (4) it shall not be necessary that Lender take possession of the Fixtures and Personal Property or any part thereof prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that the Fixtures and Personal Property or any part thereof be present at the location of such sale; (5) prior to application of proceeds of disposition of the Fixtures and Personal Property to the secured indebtedness, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the Reasonable Attorneys' Fees and other legal expenses incurred by Lender; (6) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the indebtedness or as to the occurrence of any default, or as to Lender having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Lender, shall be taken as prima facie evidence of the truth of the facts so stated and recited; (7) Lender may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the sending of notices and the conduct of the sale, but in the name and on behalf of Lender; and (8) this Deed of Trust covers Goods which are or are to become Fixtures related to the Real Property, and covers As-Extracted Collateral related to the Real Property. A carbon, photographic or other reproduction of this Deed of Trust or of any financing statement relating to this Deed of Trust shall be sufficient as a financing statement. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records in the Office of the County Clerk where the Property (including said fixtures) is situated. This Deed of Trust shall also be effective as a financing statement As-Extracted Collateral with respect to all As-Extracted Collateral included within the Real Property (including, without limitation, all oil, gas, Germantown, Maryland 32 other minerals, and other substances of value which may be extracted from the earth and all accounts arising out of the sale at the wellhead or minehead thereof), and is to be filed for record in the real estate records of the county where the Property is situated. The mailing address of Grantor is set forth in Section 43 of this Deed of Trust and the address of Lender from which information concerning the security interest may be obtained is the address of Lender set forth in Section 43 of this Deed of Trust. 26. PROTECTION OF LENDER'S SECURITY. At any time after default hereunder, Lender, or Lender's agents or contractors, is authorized, without notice and in Lender's sole discretion, to enter upon and take possession of the Property or any part thereof, and to perform any acts which Lender deems necessary or proper to conserve the security interest herein intended to be provided by the Property, to operate any business or businesses conducted thereon, and to collect and receive all Rents thereof and therefrom, including those past due as well as those accruing thereafter. 27. APPOINTMENT OF RECEIVER. If, at any time after a default hereunder, Lender deems, in Lender's sole discretion, that a receivership may be necessary to protect the Property or its Rents, whether before or after maturity of the Note and whether before or at the time of or after the institution of foreclosure or suit to collect the Loan or to enforce this Deed of Trust or any of the other Loan Documents, Lender, as a matter of strict right and regardless of the value of the Property or the amounts due hereunder or secured hereby, or of the solvency of any party bound for the payment of such indebtedness, shall have the right, upon ex parte application and without notice to anyone, and by any court having jurisdiction, to the appointment of a receiver to take charge of, manage, preserve, protect and operate the Property, to collect the Rents thereof, to make all necessary and needful repairs, and to pay all taxes, assessments, insurance premiums and other such charges against and expenses of the Property, and to do such other acts as may by such court be authorized and directed, and after payment of the expenses of the receivership and the management of the Property, to apply the net proceeds of such receivership in reduction of the Loan or in such other manner as the said court shall direct notwithstanding the fact that the amount owing thereon may not then be due and payable or the said Loan is otherwise adequately secured. Such receivership shall, at the option of Lender, continue until full payment of all sums hereby secured or until title to the Property shall have passed by sale under this Deed of Trust. Grantor hereby specifically waives its right to object to the appointment of a receiver as aforesaid, and hereby expressly agrees that such appointment shall be made as an admitted equity and as a matter of absolute right to Lender. 28. RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The rights and remedies herein provided are cumulative, and Lender, as the holder of the Note and the Grantor's Guaranty and of every other obligation secured hereby, may recover judgment thereon, issue execution therefor and resort to every other right or remedy available at law or in equity, without first exhausting any right or remedy available to Germantown, Maryland 33 Lender and without affecting or impairing the security of any right or remedy afforded hereby, and no enumeration of special rights or powers by any provisions hereof shall be construed to limit any grant of general rights or powers, or to take away or limit any and all rights granted to or vested in Lender by law or equity. Grantor further agrees that no delay or omission on the part of Lender to exercise any rights or powers accruing to it hereunder shall impair any such right or power, or shall be construed to be a waiver of any such default hereunder or an acquiescence therein; and every right, power and remedy granted herein or by law or equity to Lender may be exercised from time to time as often as Lender deems expedient. Lender may resort to any security given by this Deed of Trust or to any other security now existing or hereafter given to secure the payment of the Loan, in whole or in part, and in such portions and in such order as may seem best to Lender in its sole discretion, and any such action shall not be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Deed of Trust. To the full extent Grantor may do so, Grantor agrees that Grantor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force pertaining to the rights and remedies of sureties or providing for any appraisement, valuation, stay, extension or redemption, and Grantor, for Grantor and Grantor's heirs, devisees, representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of the assets of Grantor, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and security interests hereby created. Grantor shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right of Lender under the terms of this Deed of Trust to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right of Lender under the terms of this Deed of Trust to the payment of such indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. If any law referred to in this Section and now in force, of which Grantor or Grantor's heirs, devisees, representatives, successors and assigns and such other persons claiming any interest in the Property might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. 29. MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without notice and without regard to the consideration, if any, paid therefor, and notwithstanding the existence at that time of any inferior mortgages, deeds of trust, or other liens thereon, may release any part of the security described herein, or may release any person or entity liable for the Loan without in any way affecting the priority of this Deed of Trust, to the full extent of the Loan remaining unpaid hereunder, upon any part of the security not Germantown, Maryland 34 expressly released. Lender may, at its option and within Lender's sole discretion, also agree with any party obligated on the Loan, or having any interest in the security described herein, to extend the time for payment of any part or all of the Loan, and such agreement shall not, in any way, release or impair this Deed of Trust, but shall extend the same as against the title of all parties having any interest in said security, which interest is subject to this Deed of Trust. 30. PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the Property shall be Grantor, or such other manager as may be first approved in writing by Lender. The exclusive leasing agent of the Property, if other than Grantor or the foregoing party, shall be first approved in writing by Lender. The management and leasing contracts (or in the absence of any such written contract, a letter so stating and further identifying the name of the person or entity charged with the responsibility for managing and/or leasing the Property) shall be subordinate to this Deed of Trust, and satisfactory to and subject to the prior written approval of Lender throughout the term of the Loan. Upon default in either of these requirements, then the whole of the Loan hereby secured shall, at the election of Lender, become immediately due and payable, together with any Prepayment Premium, late payment charges and all other sums required by the Note or the other Loan Documents, and Lender shall be entitled to exercise any or all remedies provided for or referenced in this Deed of Trust. 31. MODIFICATION NOT A WAIVER. In the event Lender (a) releases, as aforesaid, any part of the security described herein or any person or entity liable for the Loan; (b) grants an extension of time for the payment of the Note; (c) takes other or additional security for the payment of the Note or the Grantor's Guaranty; or (d) waives or fails to exercise any rights granted herein, in the Note or the Grantor's Guaranty, or any of the other Loan Documents, any said act or omission shall not release Grantor, subsequent purchasers of the Property or any part thereof, or makers, sureties, endorsers or guarantors of the Note, if any, from any obligation or any covenant of this Deed of Trust, the Note, the Grantor's Guaranty, or any of the other Loan Documents, nor preclude Lender from exercising any right, power or privilege herein granted or intended to be granted in the event of any other default then made, or any subsequent default. 32. TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER OR GRANTOR; ASSUMPTION. Except as set forth in Section 38(b) hereof, without the prior written consent of Lender, the sale, transfer, assignment or conveyance of all or any portion of the Property, or the transfer, assignment or conveyance of a controlling interest in Borrower or Grantor or their respective general partners or managing members, or any guarantor, whether voluntary or by operation of law, without the prior written consent of Lender, shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to accelerate all sums due on the Note and the Grantor's Guaranty, together with any Prepayment Premiums (to the extent permitted by the Laws of the State), late payment charges or any other amounts secured hereby. Lender may, however, elect to waive the option to Germantown, Maryland 35 accelerate granted hereunder if, prior to any such sale, transfer, assignment or conveyance of the Property, the following conditions shall be fully satisfied: (a) Lender acknowledges in writing that, in Lender's sole discretion, the creditworthiness of the proposed transferee and the ability and experience of the proposed transferee to operate the Property are satisfactory to Lender, (b) Lender and the proposed transferee shall enter into an agreement in writing that (i) the rate of interest payable on the Loan shall be at such rate as Lender shall determine, (ii) the repayment schedule as set forth in the Note shall be modified by Lender, in Lender's sole discretion, to initiate amortization or modify the existing amortization schedule in order to amortize the then remaining unpaid principal balance of the Note over a period of time as determined by Lender, in Lender's sole discretion, without a change in the maturity date of the Note, and (iii) the proposed transferee shall assume all obligations of Borrower and Grantor under the Note, the Grantor's Guaranty, this Deed of Trust and the other Loan Documents in writing and an assumption fee, to be determined by Lender in Lender's sole discretion, may be charged by Lender; (c) Lender shall receive, for Lender's review and approval, copies of all transfer documents; and (d) Grantor or the transferee shall pay all costs and expenses in connection with such transfer and assumption, including, without limitation, all fees and expenses incurred by Lender. Grantor, or any subsequent owner of the Property or any portion thereof, shall do all things necessary to preserve and keep in full force and effect its and their legal existence, franchises, rights and privileges as a corporation, partnership or limited liability company, as the case may be, under the laws of the State of its formation and its right to own property and transact business in the State. It shall be a default hereunder if Grantor, or any subsequent owner of the Property or any portion thereof, shall amend, modify, transfer, assign or terminate the applicable governing documents for such entity, including its partnership agreement, certificate of partnership, operating agreement, articles of organization, regulations, articles of incorporation or bylaws, as the case may be (as applicable, the "GOVERNING DOCUMENTS"), of Grantor or such subsequent owner without the prior written consent of Lender. Grantor, or such subsequent owner of the Property, shall provide Lender with copies of any proposed amendment to its applicable Governing Documents, so that Lender may, in Lender's sole discretion, determine whether such amendment adversely affects Lender, the Property or the security value thereof. Provided, however, that any amendment, modification, transfer, assignment or termination of Grantor's applicable Governing Documents or any other action pursuant to which the current general partner or managing member of Grantor shall either: (i) cease to be the general partner or managing member of Grantor; or (ii) except to the extent permitted herein, cease to own or maintain a partnership or membership interest in Grantor equal to or greater than its partnership or membership interest at the time this Deed of Trust is executed, shall be deemed to have a material adverse effect upon Lender and the Property, and shall be a default hereunder. Grantor shall not change its name or identity in any manner which may make any financing or continuation statement filed in connection with the Loan seriously misleading Germantown, Maryland 36 within the meaning of the UCC enacted in the State or change its jurisdiction of organization unless Grantor shall have delivered to Lender written notice thereof not less than 30 days before the effective date of such change and shall have taken all action which Lender determines to be reasonably necessary or desirable to confirm and protect Lender's security interests and rights under this Deed of Trust and the perfection and priority thereof. Grantor will not change its principal places of business unless it shall have given Lender prior written notice of its intent to do so not less than thirty (30) days in advance of the effective date of such change. Grantor shall bear all costs incurred by Lender in connection with any such change including, without limitation, Reasonable Attorney's Fees. In the event the ownership of the Property, or any part thereof, shall become vested in a person or entity other than Grantor, whether with or without the prior written consent of Lender, Lender may, without notice to Grantor, deal with such successor or successors in interest with reference to the Property, this Deed of Trust and the other Loan Documents, in the same manner and to the same extent as with Grantor without in any way vitiating or discharging Grantor's liability hereunder or under any of the Loan Documents. No sale, transfer or conveyance of the Property, no forbearance on the part of Lender and no extension of time given by Lender to Grantor for the payment of the Note and the Grantor's Guaranty shall operate to release, discharge, modify, change or affect the original liability of Grantor, either in whole or in part, unless expressly set forth in writing executed by Lender. Notwithstanding anything contained herein to the contrary, Grantor hereby waives any right it now has or may hereafter have to require Lender to prove an impairment of its security as a condition to the exercise of Lender's rights under this Section 32. A sale, transfer, assignment or conveyance within the meaning of this Section shall be deemed to include, but not be limited to, (a) an installment sales agreement wherein Grantor agrees to sell the Property or any part thereof for a price to be paid in installments; (b) an agreement by Grantor leasing all or a substantial part of the Property for other than actual occupancy by a tenant under an Occupancy Lease or a sale, assignment or other transfer of, or the grant of a security interest in, Grantor's right, title and interest in and to any leases or any Rents; (c) if Grantor, any guarantor, any indemnitor, or any general partner or managing member of Grantor, is a corporation, the voluntary or involuntary sale, conveyance, transfer or pledge of such corporation's stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise), or the creation or issuance of new stock by which an aggregate of more than ten percent (10%) of such corporation's stock shall be vested in a party or parties who are not now stockholders; and (d) if Grantor, any guarantor, indemnitor, or any general partner or managing member of Grantor, is a limited partnership, general partnership, limited liability partnership, limited liability company, or joint venture, the change, removal or resignation of a general partner, managing partner, or member, or the transfer or pledge of the interest of any general partner, managing partner, or member or any profits or proceeds relating to such interest. Nothing in this Deed of Trust shall be construed to limit or restrict the transfer of shares of Agree Realty Corporation. Germantown, Maryland 37 Notwithstanding anything contained in this Section 32 to the contrary, as long as no default, or event which, with notice or the passage of time or both, could result in a default, has occurred hereunder, under the Note, the Grantor's Guaranty, or any of the other Loan Documents, Lender shall permit one (1) bona fide arm's length transfer of the Property to another borrowing entity without a change in the terms of the Loan; provided, however, that no such transfer shall be valid or permitted hereunder unless: (i) Lender receives prior Written Notice of such proposed transfer; (ii) such proposed transferee and any substitute guarantor has been approved in writing by Lender (taking into consideration such factors as transferee's creditworthiness, business experience, financial condition and managerial capabilities); (iii) the transferee's (and its sole general partner's or managing member's) single purpose and bankruptcy remote character are satisfactory to Lender in its sole discretion; (iv) Lender has obtained such other legal opinions regarding substantive consolidation issues, enforceability of the assumption documents, no adverse impact on the Securities or any REMIC holding the Note and the Grantor's Guaranty and similar matters as Lender may require, (v) the execution and delivery to Lender of a written assumption agreement covering the Note, the Grantor's Guaranty, this Deed of Trust, and the other Loan Documents and/or substitute guaranty (in Lender's sole and absolute discretion) and such modifications to the Loan Documents executed by such parties and containing such terms and conditions as Lender may require in its sole and absolute discretion prior to such sale or transfer (provided that in the event the Loan is included in a REMIC and are performing Loan, no modification to the terms and conditions shall be made or permitted that would cause (A) any adverse tax consequences to the REMIC or any holders of any Deed of Trust-Backed Pass-Through Securities, (B) this Deed of Trust to fail to be a Qualifying Security Instrument under applicable federal law relating to REMIC's, or (C) result in a taxation of the income from the Loan to the REMIC or cause a loss of REMIC status), (vi) if applicable, the delivery to Lender of an endorsement (at Grantor's sole cost and expense) to Lender's policy of title insurance then insuring the lien created by this Deed of Trust in form and substance acceptable to Lender in its sole judgment; (vii) Lender is paid a cash assumption fee in accordance with the following schedule: Two percent (2%) of the then outstanding principal balance of the Note if such outstanding principal balance is less than or equal to Three Million Dollars ($3,000,000.00), one and one-half percent (1 1/2%) of the then outstanding principal balance of the Note if such outstanding principal balance is in excess of Three Million Dollars ($3,000,000.00); (viii) Grantor pays all fees and expenses incurred by Lender in connection with such transfer and assumption, including, without limitation, inspection and investigation fees, title insurance charges, and Reasonable Attorneys' Fees; (ix) Lender approves the management agreement and leasing agreement, and the management and leasing company to be employed by the proposed transferee; and (x) the transferee is simultaneously purchasing each of the Properties which secure the Affiliate Loans, to the extent such Affiliate Loans remain outstanding. Any transfer of all or any portion of the Property which does not strictly comply with the terms and conditions of the foregoing shall be a default hereunder, and shall entitle Lender to exercise all rights and remedies provided in this Germantown, Maryland 38 Deed of Trust and the other Loan Documents. This one-time right of transfer shall apply to the Grantor named herein and not to any subsequent owner of the Property. 33. FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the Note and the Grantor's Guaranty remain unpaid, Grantor shall not, either voluntarily or involuntarily, permit the Property or any part thereof to become subject to any secondary or subordinate lien, mortgage, deed of trust, security interest or encumbrance of any kind whatsoever without the prior written consent of Lender, and the imposition of any such secondary lien, mortgage, deed of trust, security interest or encumbrance without the approval of Lender shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to declare the outstanding principal balance of the Note, all accrued and unpaid interest thereon, Prepayment Premiums (to the extent permitted by the laws of the State, late payment charges and any other amounts secured hereby to be and become immediately due and payable in full. In the event that Lender shall hereafter give its written consent to the imposition of any such secondary lien, mortgage, deed of trust, security interest or other encumbrance upon the Property, Lender, at Lender's sole option, shall be entitled to accelerate the maturity of the Note and the Grantor's Guaranty and exercise any and all remedies provided and available to Lender hereunder and in the other Loan Documents in the event that the holder of any such secondary lien or encumbrance shall institute foreclosure or other proceedings to enforce the same; it being understood and agreed that a default under any instrument or document evidencing, securing or secured by any such secondary lien or encumbrance shall be and constitute a default hereunder. In the event all or any portion of the proceeds of the Loan are used for the purpose of retiring debt or debts secured by prior liens on the Property, Lender shall be subrogated to the rights and lien priority of the holder or holders of the lien or liens so discharged. 34. CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Grantor agrees that the making of any oil, gas or mineral lease, or the sale or conveyance of any mineral interest or right to explore for minerals under, through or upon the Property, would impair the value of the Property, and that Grantor shall have no right, power or authority to lease the Property, or any part thereof, for oil, gas or other mineral purposes, or to grant, assign or convey any mineral interest of any nature, or the right to explore for oil, gas and other minerals, without first obtaining Lender's express written permission therefor, which permission shall not be valid until recorded among the Land Records of the county in which the Property is located. Grantor further agrees that if Grantor shall make, execute, or enter into any such lease or attempt to grant any such mineral rights without such prior written permission of Lender, then Lender shall have the option, without notice, to declare the same to be a default hereunder, and to declare the Loan immediately due and payable in full. Whether or not Lender shall consent to such lease or grant of mineral rights, Lender shall receive the entire consideration to be paid for any such lease or grant of mineral rights, with the same to be applied to the Loan notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan is otherwise adequately secured; provided, however, that the Germantown, Maryland 39 acceptance of such consideration shall in no way impair the lien of this Deed of Trust on the Property or cure any existing Monetary Default. 35. ESTOPPEL CERTIFICATION BY GRANTOR. Grantor, upon request of Lender therefor made either personally or by mail, shall certify in writing to Lender (or any party designated by Lender), in a form satisfactory to Lender or such designee, the amount of principal and interest then outstanding under the terms of the Note and the Grantor's Guaranty and any other sums due and owing under this Deed of Trust or any of the other Loan Documents, and whether any offsets or defenses exist against the Loan. Such certification shall be made by Grantor within ten (10) days if the request is made personally, or within twenty (20) days if the request is made by mail. 36. CROSS-DEFAULT. The Note is also secured by the terms, conditions and provisions of the Assignment, by three Cross-Default Guaranty Agreements of even date herewith from Agree - Columbia Crossing Project, L.L.C., a Delaware limited liability company, as guarantor for a loan made by Lender to Agree-Columbia, Omaha, and Oklahoma City, respectively in favor of Lender (hereinafter individually or collectively referred to as the "AFFILIATED-GRANTOR CROSS-DEFAULT GUARANTYS") and, additionally, may be secured by contracts or agreements of guaranty or other security instruments. The terms, covenants, conditions and agreements of each security instrument shall be considered a part hereof as fully as if set forth herein verbatim. Any default under this Deed of Trust, any Affiliated Grantor Cross-Default Guaranty or any of the other Loan Documents shall constitute a default hereunder and under each of the other Loan Documents. Notwithstanding the foregoing, the enforcement or attempted enforcement of this Deed of Trust or any of the other Loan Documents now or hereafter held by Lender shall not prejudice or in any manner affect the right of Lender to enforce any other Loan Document; it being understood and agreed that Lender shall be entitled to enforce this Deed of Trust and any of the other Loan Documents now or hereafter held by it in such order and manner as Lender, in its sole discretion, shall determine. 37. EXAMINATION OF GRANTOR'S RECORDS. Grantor will maintain complete and accurate books and records showing in detail the income and expenses of the Property, and will permit Lender and its agents, contractors or representatives to examine said books and records and all supporting vouchers and data during normal business hours and from time to time upon request by Lender, in such place as such books and records are customarily kept. Grantor will furnish to Lender, within one hundred twenty (120) days after the close of each respective fiscal period annual and quarterly financial statements (income statements and a balance sheet) for the Grantor and the Property. Grantor will furnish to Lender on or before 45 calendar days after the end of each calendar quarter the following items, each certified by Grantor as being true and correct, in such format and in such detail as Lender or its servicer may request: (a) a written statement (rent roll) dated as of the last day of each such calendar quarter identifying each of the Occupancy Leases by the term, space occupied, rental required Germantown, Maryland 40 to be paid (including percentage rents and tenant sales), security deposit paid, any rental concessions, all rent escalations, any rents paid more than one month in advance, any special provisions or inducements granted to tenants, any taxes, maintenance and other common charges paid by tenants, all vacancies and identifying any defaults or payment delinquencies thereunder; and (b) quarterly and year-to-date operating statements prepared for each calendar quarter during each such reporting period detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow. These statements shall be in form acceptable to Lender and its servicer, shall be prepared in accordance with generally accepted accounting principles, and shall include a rent roll, certified as true and correct by Grantor. The statements shall show in detail all income derived from and expenses incurred in connection with the ownership of the Property, including current annual sales figures for all Major Tenants of the Property if required under the Major Tenant leases or if such financial information is otherwise available. Grantor shall deliver to Lender, for Grantor, or any entity with whom Grantor's tax return is consolidated, copies of all income tax returns, requests for extension and other similar items contemporaneously with its delivery of same to the Internal Revenue Service. In the event Grantor fails to provide such statements to Lender within the time prescribed above, Grantor shall pay Lender the sum of $200.00 in administrative expenses for each successive month for which the statements are delinquent (or in the case of such statements to be delivered prior to the transfer of the Loan to Investor (hereafter defined), for each successive week for which the statements are delinquent). Upon a default hereunder, Lender shall have the right to require that said financial statements be audited and certified by a certified public accountant acceptable to Lender, at the sole cost and expense of Grantor. Prior to the transfer of the Loan to Investor by Lender, Grantor shall deliver to Lender the reports required above on a monthly basis. Such reports shall be delivered within ten calendar days after the end of each calendar month. In addition, at the request of Lender, but in no case more often than once a quarter nor more than three (3) times during the term of the Loan, unless a default has occurred, Grantor shall furnish to Lender (i) unaudited financial statements (balance sheet, income statement, cash flow statement and current rent roll) covering operation of the Property for periods other than those set forth in the preceding paragraph and (ii) unaudited financial statements (balance sheets, income statements, and cash flow statements) for Grantor, its general partner(s), shareholder(s) or member(s) (whichever is applicable) and for such other principals of Grantor as designated by Lender, provided that for so long as the Property is held by Grantor such statements shall be required only for Grantor and Agree Realty Corporation. All such statements shall be certified to Lender to be complete, correct, and accurate by the individual (for an individual's statements) or by an authorized representative of the entity (if statements are for a partnership, corporation or limited liability company). Germantown, Maryland 41 Any inspection or audit of the Property or the books and records of Grantor, or the procuring of documents and financial and other information, by or on behalf of Lender, shall be at Grantor's expense and shall be for Lender's protection only, and shall not constitute any assumption of responsibility or liability by Lender to Grantor or anyone else with regard to the condition, construction, maintenance or operation of the Property, nor Lender's approval of any certification given to Lender nor relieve Grantor of any of Grantor's obligations. 38. ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED. Grantor covenants and agrees to permit or suffer none of the following without the prior written consent of Lender: (a) Any structural alteration of, or addition to, the Improvements now or hereafter situated upon the Real Property, or the addition of any new buildings or other structure(s) thereto, other than the erection or removal of non-load bearing interior walls or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect; or (b) The removal, transfer, sale or lease of the Property, except that the removal, replacement or substitution of fixtures, equipment, machinery, apparatus and articles of personal property (replacement or substituted items must be of like or better quality than the removed items in their original condition) encumbered hereby may be made in the normal course of business; or (c) The use of any of the Improvements now or hereafter situated on the Real Property for any purpose other than the Existing Use and related facilities, or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect. 39. FUTURE ADVANCES SECURED. This Deed of Trust shall secure not only existing indebtedness, but also future advances, whether such advances are obligatory or to be made at the option of Lender. Upon the request of Grantor, and at Lender's option prior to release of this Deed of Trust, Lender may make future advances to Grantor. All future advances with interest thereon shall be secured by this Deed of Trust to the same extent as if such future advances were made on the date of the execution of this Deed of Trust unless the parties shall agree otherwise in writing, but the total secured indebtedness shall not exceed at any one time a maximum principal amount equal to double the face amount of the Note plus interest and costs of collection, including court costs and Reasonable Attorneys' Fees. Any advances or disbursements made for the benefit or protection of or the payment of taxes, assessments, levies or insurance upon the Property, with interest on such disbursements as provided herein, shall be added to the principal balance of the Note and collected as a part thereof. To the extent that Grantor's Guaranty secured by this Deed of Trust may secure more than one note, a default in the payment of any such mortgage note shall constitute a default in the payment of all such Note. Germantown, Maryland 42 40. EFFECT OF SECURITY AGREEMENT. Grantor agrees to, and shall upon the request of Lender, execute and deliver to Lender, in form and content satisfactory to Lender, such financing statements, descriptions of property and such further assurances as Lender, in Lender's sole discretion, may from time to time consider necessary to create, perfect, continue and preserve the lien and encumbrances hereof, and the security interest granted herein, upon and in the Property. Without the prior written consent of Lender, Grantor shall not create or suffer to be created, pursuant to the UCC, any other security interest in such real and personal property and fixtures described herein. Upon the occurrence of a default hereunder or Grantor's breach of any other covenants or agreements between the parties entered into in conjunction herewith, Lender shall have the remedies of a secured party under the UCC as provided in Section 25, and at Lender's option, the remedies provided for in this Deed of Trust and the other Loan Documents. Lender, at the expense of Grantor, may cause such statements, descriptions and assurances, as herein provided in this Section 40, and this Deed of Trust, to be recorded and re-recorded, filed and refiled, at such times and in such places as may be required or permitted by law to so create, perfect and preserve the lien and encumbrance hereof upon all of the Property. 41. TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions of the Application for Deed of Trust Loan dated August 28, 2003, and any subsequent amendments thereto (the "APPLICATION"), executed by and between Grantor and Lender, are incorporated herein by reference. All terms, covenants, conditions and agreements of the Application not expressly set forth in this Deed of Trust and any of the other Loan Documents shall survive the execution and delivery hereof, and remain in full force and effect. In the event any conflict exists between the terms, covenants, conditions and agreements of the Application and the Loan Documents, the terms, covenants, conditions and agreements of the Loan Documents shall prevail. 42. SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof shall be binding upon Grantor and the heirs, personal representatives, trustees, successors and assigns of Grantor, and shall inure to the benefit of Lender, its successors and assigns. Where more than one Grantor is named herein, the obligations and liabilities of said Grantor shall be joint and several. Wherever used in this Deed of Trust, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein: (a) the word "Grantor" shall mean Grantor and/or any subsequent owner or owners of the Property; (b) the word "Lender" shall mean Lender or any subsequent holder or holders of this Deed of Trust; (c) the word "Note" shall mean the Note(s) secured by this Deed of Trust; and (d) the word "person" shall mean an individual, trustee, trust, corporation, partnership, limited liability corporation, limited liability partnership, joint venture or unincorporated association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean fees charged by attorneys selected by Lender based upon such attorneys' then prevailing hourly rates as opposed to any statutory presumption Germantown, Maryland 43 specified by any statute then in effect in the State. As used herein words of any gender shall include all other genders. 43. NOTICES. All notices, reports, requests or other written instruments required or permitted hereunder, shall be in writing, signed by the party giving or making the same, and shall be sent hand-delivered, effective upon receipt, sent by United States Express Mail or by a nationally recognized overnight courier, effective upon receipt, or sent by United States registered or certified mail, postage prepaid, with return receipt requested, deemed effective on the earlier of the day of actual delivery as shown by the addressee's return receipt or the expiration of three business days after the date of mailing, addressed to the party intended to receive the same at the address set forth below or at such other address as shall be given in writing by any party to another ("WRITTEN NOTICE"): If to Grantor: AGREE - MILESTONE CENTER PROJECT, L.L.C. 31850 Northwestern Highway Farmington Hills, Michigan 48334 Attention: Mr. Richard Agree If to Lender: NATIONWIDE LIFE INSURANCE COMPANY One Nationwide Plaza Columbus, Ohio 43215-2220 Attention: Real Estate Investment Department, 34T 44. GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. GRANTOR AND LENDER, EACH TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM WHICH ANY PARTY MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, Germantown, Maryland 44 CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, GRANTOR WAIVES ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Deed of Trust and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the internal laws of the State, without regard to principles of conflicts of laws. The parties hereto irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Deed of Trust may be brought in a court of record in the State or in the courts of the United States of America located in such State, (b) consent to the non-exclusive jurisdiction of each such court in any suit, action or proceeding, and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. If any clauses or provisions herein contained operate, or would prospectively operate, to invalidate this Deed of Trust, then such clauses or provisions only shall be held for naught, as though not herein contained, and the remainder of this Deed of Trust shall remain operative and in full force and effect. 45. RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising under the terms, covenants, conditions and agreements contained in this Deed of Trust shall be separate, distinct and cumulative, and none of them shall be in exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provisions, anything herein or otherwise to the contrary notwithstanding. If Grantor is comprised of more than one person or entity, then the liability of each such person and entity hereunder shall be joint and several. 46. MODIFICATIONS. This Deed of Trust cannot be changed, altered, amended or modified except by an agreement in writing and in recordable form, executed by both Grantor and Lender. 47. EXCULPATION. Notwithstanding anything contained herein to the contrary, the liability of Grantor is subject to the limited recourse provisions contained in the Exculpation section of the Note, which are incorporated herein and made a part hereof by reference as if fully set forth herein. 48. FULL RECOURSE. Notwithstanding any provisions in this Deed of Trust to the contrary, including without limitation the provisions set forth in the section captioned "Exculpation" hereinabove, Grantor shall be personally liable, jointly and severally, for the entire Loan secured by this Deed of Trust (including all principal, interest and other charges) in the event (a) Grantor violates the covenant governing the placing of subordinate financing on the Property as set forth in this Deed of Trust; (b) Grantor violates the covenant restricting transfers of interests in the Property or transfers of ownership interests in Grantor as set forth in this Deed of Trust; or (c) Grantor or any guarantor violates the provisions of Section 22 of this Deed of Trust, or there is filed against Grantor or any guarantor or indemnitor of the Germantown, Maryland 45 Loan, a petition in bankruptcy or for the appointment of a receiver, or there commences under any bankruptcy or insolvency law, proceedings for Grantor's relief, or for the compromise, extension, arrangement or adjustment of Grantor's obligations which is not dismissed within thirty (30) days after the filing of same. 49. LENDER IS NOT A JOINT VENTURER OR PARTNER. Grantor and Lender acknowledge and agree that in no event shall Lender be deemed to be a partner or joint venturer with Grantor or any member of Grantor. Without limitation of the foregoing, Lender shall not be deemed to be a partner or joint venturer on account of its becoming a mortgagee in possession or exercising any rights pursuant to this Deed of Trust or pursuant to any other instrument or document evidencing or securing any of the indebtedness secured hereby, or otherwise. 50. CAPTIONS. The captions set forth at the beginning of the various Sections of this Deed of Trust are for convenience only, and shall not be used to interpret or construe the provisions of this Deed of Trust. 51. TRUSTEES. Trustees hereby accept the trust created by this Deed of Trust, upon the terms and subject to the conditions set forth herein, including the following: Trustees assume no responsibility for and make no representations as to (i) the description, identification or value of the Property or any part thereof, (ii) the validity or sufficiency of the Loan Documents, (iii) Borrower's or Grantor's present or future financial condition, or (iv) the validity or collectibility of the Note or the Grantor's Guaranty. Trustees (i) may exercise their powers and perform their duties hereunder either directly or by or through such attorneys, agents, servants as they shall appoint, and (ii) shall not be answerable or liable (x) for the acts, negligence or default of any such attorney, agent or servant which Trustees may so appoint so long as the same are selected with care, or (y) for any act or omission of Lender, or (z) for any other cause arising under this Deed of Trust or otherwise, except for each such Trustee's own individual willful misconduct. Trustees, in their discretion may consult with legal counsel selected and employed by Trustees, and Trustees shall incur no liability to Grantor, Lender or to any other person by reason of any action taken, suffered or omitted by Trustees in accordance with the opinion of such counsel. Trustees shall be under no obligation to sell the Property or any part thereof upon a default hereunder, or to exercise any of the rights or powers vested in Trustees by this Deed of Trust, except upon the written request or direction of Lender and upon Lender furnishing security or an indemnity satisfactory to Trustees against costs, expenses and liabilities incurred Germantown, Maryland 46 or which may be incurred by Trustees in selling the Property or in complying with such request or direction. At any time that more than one person is acting as Trustee hereunder, the powers vested in Trustees may be exercised by either Trustee acting individually in the event of the unavailability of the other Trustee. Any person acting as Trustee hereunder may resign as Trustee upon written notice to the Lender. Lender may remove Trustees at any time or from time to time for any reason (with or without cause) and appoint a successor trustee or trustees, and upon such appointment, all powers, rights, duties and authority of Trustees, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall be appointed by written instrument duly recorded in the county or counties where the Property covered hereby is located, which appointment may be executed by any authorized agent of Lender or in any other manner permitted by applicable law. 52. SPLITTING OF DEED OF TRUST. This Deed of Trust and the Note and the Grantor's Guaranty, shall, at any time until the same shall be fully paid and satisfied, at the sole election of Lender, be split or divided into two or more notes and two or more security instruments, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Grantor, upon written request of Lender, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Lender and/or its designee or designees substitute notes and security instruments in such principal amounts, aggregating not more than the then unpaid principal amount of Loan, and containing terms, provisions and clauses similar to those contained herein and in the Note and the Grantor's Guaranty, and such other documents and instruments as may be required by Lender. 53. REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note, the Grantor's Guaranty or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note, the Grantor's Guaranty, or other Loan Document, Grantor, at its expense, will issue or cause to be issued, in lieu thereof, a replacement Note, the Grantor's Guaranty, or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note, Grantor's Guaranty, or other Loan Document in the same principal amount thereof and otherwise of like tenor. 54. SOLE DISCRETION OF LENDER. Wherever pursuant to this Deed of Trust Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Germantown, Maryland 47 Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 55. TRANSFER OF LOAN. (a) Lender may, at any time, sell, transfer or assign the Note, the Grantor's Guaranty, this Deed of Trust, the Assignment and the other Loan Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "SECURITIES"), or otherwise sell the Loan or an interest therein (a "SECONDARY MARKET TRANSACTION"). Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor in such Securities or in connection with a Secondary Market Transaction or any Rating Agency rating such Securities (collectively, the "INVESTOR") and each prospective Investor, all documents and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, Grantor, any Guarantor and the Property, whether furnished by Borrower, Grantor, any Guarantor or otherwise, as Lender determines necessary or desirable. Grantor acknowledges that certain information regarding the Loan and the parties thereto and the Property may be included in a private placement memorandum, prospectus or other disclosure documents. The term "RATING AGENCY" shall mean each statistical rating agency that has assigned a rating to the Securities. (b) Grantor shall cooperate in good faith with Lender in effecting any such Secondary Market Transaction and shall cooperate in good faith to implement all requirements reasonably imposed by the participants involved in any Secondary Market Transaction (including without limitation, a Rating Agency and/or an Investor) including, without limitation, all structural or other changes to the Loan, modifications to any documents evidencing or securing the Loan, delivery of opinions of counsel acceptable to the Rating Agency or such Investors and addressing such matters as the Rating Agency or such Investors may require; provided, however, that the Grantor shall not be required to modify any documents evidencing or securing the Loan which would modify (i) the interest rate payable under the Note, (ii) the stated maturity of the Note, (iii) the amortization of principal of the Note, or (iv) any other material terms or covenants of the Loan. (c) If Securities are issued in connection with the Loan or a Secondary Market Transaction occurs with respect to the Loan, all Funds held by Lender in escrow or pursuant to reserves in accordance with the Loan Documents shall be deposited in "eligible accounts" at "eligible institutions" and invested in "permitted investments" as then defined and required by any Rating Agency. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Germantown, Maryland 48 IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first above written. GRANTOR: AGREE - MILESTONE CENTER PROJECT, L.L.C., a Delaware limited liability company By: AGREE LIMITED PARTNERSHIP, a Delaware limited partnership Its Member By: AGREE REALTY CORPORATION, a Maryland corporation Its General Partner By: /s/ Richard Agree ------------------ Richard Agree President STATE OF ) ) COUNTY OF ) The foregoing instrument was acknowledged before me this _____ day of October, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a Maryland corporation, on behalf of the corporation as general partner of Agree Limited Partnership, a Delaware partnership, as member of Agree - Milestone Center Project, L.L.C., a Delaware limited liability company. ------------------------------ Name: ------------------------------ Notary Public My Commission Expires: -------------- (SEAL) Germantown, Maryland S-1 The undersigned, an attorney admitted to practice before the Court of Appeals of Maryland, hereby certifies that the within instrument was prepared by me or under my supervision. - ----------------------------- Attorney's Name: ------------------ Germantown, Maryland S-2 EXHIBIT A (Legal Description) SITUATED IN THE CITY OF GERMANTOWN, COUNTY OF MONTGOMERY, STATE OF MARYLAND: Lot numbered Twenty-nine (29) in Block lettered "C" as shown on a plat of subdivision entitled "Plat of Resubdivision, Lots 27-29 and Outlots A & B, Block C, Milestone Center", and recorded among the land records of Montgomery County, Maryland in Plat Book 185, at Plat No. 20444. Together with ingress/egress easements set forth in Liber 13760, folio 483 and Liber 13760, Folio 569 aforesaid land records. Germantown, Maryland A-1 EXHIBIT B LOCAL REQUIREMENTS FOR RECORDING 1. Parcel identifier assigned to the Property by the Clerk of the Circuit Court for Montgomery County: --------------------------------. 2. County tax account number for the Property: -----------------------. 3. Record legal description of the boundaries of the Property: 4. Street address of the Property: -----------------------------------. 5. Full name and address of each party to the instrument and the nature of the party's interest: 6. Name of title insurer insuring the instrument: ---------------------. Germantown, Maryland A-2 EX-10.35 5 k82459exv10w35.txt MORTGAGE AND SECURITY AGREEMENT DATED 10/31/2003 Recorded at the Request of and EXHIBIT 10.35 When Recorded Return to: Pepe & Hazard LLP 225 Asylum Street - 22nd Floor Hartford, CT 06103-4302 Attention: Adam F. Zweifler, Esq. MORTGAGE AND SECURITY AGREEMENT This MORTGAGE AND SECURITY AGREEMENT (the "MORTGAGE") is dated as of the 31st day of October, 2003, by OKLAHOMA CITY STORE NO. 151 L.L.C., a Delaware limited liability company ("BORROWER"), having its principal office at 31850 Northwestern Highway, Farmington Hills, Michigan 48334 to and in favor of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its successors and assigns ("LENDER"), having its principal office at One Nationwide Plaza, Columbus, Ohio 43215-2220, Attention: Real Estate Investment Department, 34T, or at such other place as Lender may from time to time designate. W I T N E S S E T H: WHEREAS, Lender has made four loans of even date herewith in the aggregate total original principal amount of Fifteen Million Dollars ($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the following loans of even date herewith: a loan from Lender to Borrower in the original principal amount of $4,260,000.00 (this "LOAN"); a loan to ACMP Germantown LLC, a Delaware limited liability company ("AGREE-MILESTONE"), in the original principal amount of $3,310,000.00 (the "AGREE-MILESTONE LOAN"); a loan to ACCP Maryland LLC, a Delaware limited liability company ("AGREE-COLUMBIA") in the original principal amount of $3,520,000.00 (the "AGREE-COLUMBIA LOAN"); and a loan to Omaha Store No. 166 L.L.C., a Delaware limited liability company ("OMAHA"), in the original principal amount of $3,910,000.00 (the "OMAHA LOAN") Agree-Milestone, Agree-Columbia and Omaha are hereinafter referred to collectively as the "AFFILIATED BORROWERS". The Agree-Milestone Loan, the Agree-Columbia Loan and the Omaha Loan are hereinafter referred to generically as an "AFFILIATE LOAN" and collectively as the "AFFILIATE LOANS"; Oklahoma City, Oklahoma WHEREAS, Borrower is justly indebted to Lender in the original principal sum of Four Million Two Hundred Sixty Thousand and 00/100 Dollars ($4,260,000.00) with interest thereon, which Loan is evidenced and represented by that certain Note of even date herewith (the "NOTE"), both principal and interest being payable as therein provided, with the first payment on the Note becoming due and payable on the date of disbursement and the term "Note" shall include all other notes given in substitution, modification, increase, renewal or extension of the original Note described herein, in whole or in part; WHEREAS Borrower has guaranteed the payment and performance of the obligations of the Affiliated Borrowers with respect to the Affiliate Loans pursuant to the terms of that certain Cross-Default Guaranty Agreement of even date herewith from Borrower, as guarantor, to Lender (the "BORROWER CROSS-DEFAULT GUARANTY"); and WHEREAS, Lender, as a condition precedent to the extension of credit and the making of the Loan has required that Borrower provide Lender with security for the repayment of the Loan as well as for the performance, observance and discharge by Borrower of various terms, covenants, conditions and agreements made by Borrower to, with, in favor of and for the benefit of Lender with respect to the Loan and such security; NOW THEREFORE, in consideration of and in order to secure the repayment of the Loan evidenced and represented by the Note, together with interest on the Loan, as well as the payment of all other sums of money secured hereby, as hereinafter provided; to secure the observance, performance and discharge by Borrower of all terms, covenants, conditions and agreements set forth in the Note, this Mortgage and in the other Loan Documents (hereafter defined); in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of one dollar paid by Lender to Borrower, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged by Borrower, Borrower does hereby grant, bargain, sell, convey, assign, transfer, pledge, deliver, hypothecate, warrant and confirm unto Lender forever, all of Borrower's right, title and interest in and to the following described properties, including all rights, interests, replacements, substitutions and additions thereto, therein or therefore (collectively, the "MORTGAGED PROPERTY"): (i) All that certain piece, parcel or tract of land or real property of which Borrower is now seized and in actual or constructive possession, situated in the City of Omaha, County of Douglas, and State of Nebraska (the "STATE"), and being more particularly described on EXHIBIT A attached hereto and by this reference made a part hereof (the "REAL PROPERTY"); (ii) All buildings, structures and other improvements of any kind, nature or description now or hereafter erected, constructed, placed or located upon the Real Property (the "IMPROVEMENTS"), including, without limitation, any and all additions to, substitutions for or replacements of such Improvements; Oklahoma City, Oklahoma 2 (iii) All minerals, royalties, gas rights, water, water rights, water stock, flowers, shrubs, lawn plants, crops, trees, timber and other emblements now or hereafter located on, under or above all or any part of the Real Property; (iv) All and singular, the tenements, hereditaments, strips and gores, rights-of-way, easements, privileges, profits and other appurtenances now or hereafter belonging or in any way appertaining to the Real Property, including, without limitation, all right, title and interest of the Borrower in any after-acquired right, title, interest, remainder or reversion in and to the beds of any ways, streets, avenues, roads, alleys, passages and public places, open or proposed, in front of, running through, adjoining or adjacent to the Real Property (the "APPURTENANCES"); (v) Any and all leases, licenses, contracts, rents, license fees, royalties, issues, revenues, profits, proceeds, deposits, income and other benefits, including accounts receivable, termination fees, of, accruing to or derived from the Real Property, Improvements and Appurtenances, and any business or enterprise presently situated or hereafter operated thereon and therewith and all of Borrower's right, title and interest under any and all lease guaranties, letters of credit, and any other credit support furnished to Borrower in connection with any of the foregoing (the "RENTS"); (vi) Any and all awards, payments or settlements, including interest thereon, and the right to receive the same, as a result of: (a) the exercise of the right of eminent domain; (b) the alteration of the grade of any way, street, avenue, road, alley, passage or public place; (c) any other injury, damage, casualty or claim relating to the taking of, or decrease in the value of, the Real Property, Improvements or Appurtenances; or (d) proceeds of insurance awards, to the extent of all amounts which may be secured by this Mortgage at the date of any such award or payment including but not limited to Reasonable Attorneys' Fees (as hereinafter defined), costs and disbursements incurred by Lender in connection with the collection of such award or payment; (vii) All fixtures, materials, equipment, machinery, apparatus, appliances, and other property whatsoever now or hereafter attached to, installed in, or used in connection with the buildings and other improvements now erected or hereafter to be erected on said land, including, but not limited to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators, air-conditioning and sprinkler systems, gas and electric fixtures, carpets, rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all other furnishings, tools, equipment and machinery, appliances, building supplies, materials, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing, all of which property and things are hereby declared to be permanent fixtures and accessions to the freehold and part of the realty conveyed herein as security for the indebtedness herein mentioned; and Oklahoma City, Oklahoma 3 (viii) All agreements or contracts relating to any interest rate cap agreements, swaps or other interest hedging agreements; TO HAVE AND TO HOLD the foregoing Mortgaged Property and the rights hereby granted for its use and benefit unto Lender and its successors and assigns in fee simple forever. In order to secure the repayment of the Loan evidenced and represented by the Note, together with interest on the Loan, as well as the payment of all other sums of money secured hereby including, without limitation, the obligations of Borrower under the Borrower Cross-Default Guaranty, as hereinafter provided; and to secure the observance, performance and discharge by Borrower of all covenants, conditions and agreements set forth in the Note, this Mortgage, the Borrower Cross-Default Guaranty and in the other Loan Documents; and in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of Ten Dollars ($10.00) paid by Lender and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Borrower hereby grants Lender a security interest in all Fixtures, Goods (including, without limitation, Consumer Goods, Inventory, Equipment and Farm Products), Accounts, Chattel Paper (including, without limitation, Electronic Chattel Paper and Tangible Chattel Paper), Instruments, General Intangibles (including, without limitation, Payment Intangibles and Software), Letters of Credit, Letter-of-Credit Rights, Documents, As-Extracted Collateral, Money and Deposit Accounts of every kind, and all proceeds thereof, including, without limitation, any and all licenses, permits, franchises, trademarks, trade names, service marks or logos, plans, specifications, maps, construction contracts, instruments, insurance policies, fittings and fixtures of every kind, which is, are or shall hereafter be located upon, attached, affixed to or used or useful, either directly or indirectly, in connection with the complete and comfortable use, occupancy and operation of the Real Property, Improvements or Appurtenances as a retail project (the "EXISTING USE"), or any other business, enterprise or operation as may hereafter be conducted upon or with said Real Property, Improvements or Appurtenances, including, without limitation, any and all licenses, permits or franchises, used or required in connection with such use, occupancy or operation as well as the proceeds thereof or therefrom regardless of form, all security deposits and advance rentals under lease agreements now or at any time hereafter covering or affecting any of the Property and held by or for the benefit of Borrower, all monetary deposits which Borrower has been required to give to any public or private utility with respect to utility services furnished to the Real Property or Improvements, all rents, issues and profits from leases of all or any part of the Real Property or Improvements, all proceeds (including premium refunds) of each policy of insurance relating to the Real Property or Improvements, all proceeds from the taking of the Real Property or Improvements or any part thereof or any interest therein or right or estate appurtenant thereto by eminent domain or by purchase in lieu thereof, all amounts deposited in escrow for the payment of ad valorem taxes, assessments, charges, ground rentals and/or premiums for policies of insurance with respect to the Real Property or Oklahoma City, Oklahoma 4 Improvements, all proceeds and other amounts paid or owing to Borrower under or pursuant to any and all contracts and bonds relating to the construction, erection or renovation of the Real Property or Improvements, all oil, gas and other hydrocarbons and other minerals produced from or allocated to the Real Property and all products processed or obtained therefrom, the proceeds thereof, and all accounts and general intangibles under which such proceeds may arise, together with any sums of money that may now or at any time hereafter become due and payable to Borrower by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of any kind or character arising under any and all present and future oil, gas and mining leases covering the Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL PROPERTY," which term expressly excludes any toxic waste or substance deemed hazardous under federal, regional, state or local laws, codes, ordinances, statutes, rules, regulations, decisions or orders). The Mortgaged Property and the Fixtures and Personal Property are herein together referred to as the "PROPERTY". Except as otherwise expressly provided in this Mortgage, all terms in this Mortgage relating to the Property and the grant of the foregoing security interest which are defined in the Uniform Commercial Code of the State (the "UCC") shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the UCC, as those meanings may be amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the UCC have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the UCC in effect on the date of this Mortgage, then such term, as used herein, shall be given such broadened meaning. If the UCC shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the UCC in effect on the date of this Mortgage, such amendment or holding shall be disregarded in defining terms used in this Mortgage. Borrower hereby covenants and warrants with and to Lender that Borrower is indefeasibly seized of the Property and has good right, full power, and lawful authority to convey and encumber all of the same as aforesaid; that Borrower hereby fully warrants the title to the Property and will defend the same and the validity and priority of the lien and encumbrance of this Mortgage against the lawful claims of all persons whomsoever; and Borrower further warrants that the Property is free and clear of all liens and encumbrances of any kind, nature or description, save and except only (with respect to said Real Property, Improvements and Appurtenances) for real property taxes for years subsequent to 2003 (which are not yet due and payable) and those exceptions accepted by Lender as set forth in the title insurance commitment or proforma policy issued to Lender precedent to the issuance of a Lender's Policy of Title Insurance insuring the first lien priority of this Mortgage (the "PERMITTED EXCEPTIONS"). If Borrower shall pay to Lender the Loan evidenced by the Note, and if Borrower shall duly, promptly and fully perform, discharge, execute, effect, complete and comply with and abide by each and every one of the terms, covenants, conditions and agreements of the Note, Oklahoma City, Oklahoma 5 this Mortgage, the Borrower Cross-Default Guaranty and all other Loan Documents, then this Mortgage and the estates and interests hereby granted and created shall cease, terminate and be null and void, and shall be discharged of record at the expense of Borrower. Borrower, for the benefit of Lender and its successors and assigns, does hereby expressly covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall pay the principal of the Loan evidenced by the Note, together with all interest thereon, in accordance with the terms, covenants and conditions of the Note, and perform all obligations of Borrower under the Borrower Cross-Default Guaranty promptly at the times, at the place and in the manner that said principal and interest shall become due, and shall promptly and punctually pay all other sums required to be paid by Borrower pursuant to the terms, covenants and conditions of the Note, this Mortgage, the Borrower Cross-Default Guaranty, the Assignment of Leases, Rents and Profits of even date herewith (the "ASSIGNMENT") and all other documents and instruments executed as further evidence of, as additional security for or executed in connection with the Loan evidenced by the Note (collectively, the "LOAN DOCUMENTS"). 2. PERFORMANCE OF OTHER OBLIGATIONS. Borrower shall perform, comply with and abide by each and every one of the terms, covenants, conditions and agreements contained and set forth in the Note, this Mortgage, and the other Loan Documents, shall comply with all Laws (hereafter defined) and shall perform all of its obligations under any term, covenant, condition, restriction or agreement of record affecting the Property, and to insure that at all times the Property constitutes one or more legal lots capable of being conveyed without violation of any subdivision or platting laws, codes, ordinances, statutes, rules, regulations, or other laws relating to the division, separation or subdivision of real property. 3. PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY; HAZARDOUS WASTE. (a) Borrower shall keep all Improvements now existing or hereafter erected on the Real Property in good order and repair, only to be used for the Existing Use, and not to do or permit any waste, impairment or deterioration thereof or thereon, nor to alter, remove or demolish any of the Improvements or any Fixtures and Personal Property attached or appertaining thereto, without the prior written consent of Lender, nor to initiate, join in or consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the uses which may be made of the Property or any part thereof, nor to do or permit any other act whereby the Property shall become less valuable, be used for purposes contrary to applicable Law or be used in any manner which will increase the premium for or result in a termination or cancellation of the insurance policies hereinafter required to be kept and maintained on the Property. In furtherance of, and not by Oklahoma City, Oklahoma 6 way of limitation upon, the foregoing covenant, Borrower shall effect such repairs as Lender may reasonably require, and from time to time make all needful and proper replacements so that the Improvements, Appurtenances, Fixtures and Personal Property will, at all times, be in good condition, fit and proper for the respective purposes for which they were originally erected or installed. In connection with the making of such repairs, Borrower shall use contractors who are properly licensed, who carry workers' compensation insurance and appropriate liability insurance, who generally have a good reputation for completing their work in a neat, prompt and workmanlike manner, and use only new or re-manufactured goods of a quality as good or better than that originally used on the Property. As provided herein, Borrower shall insure that no liens are filed against the Property that relate in any way to the repair work provided for herein. For so long as that certain Lease of the Property (the "BORDERS LEASE") dated November 14, 2002 between Borrower, as landlord, and Border's, Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with Borders as the tenant thereunder and Borrower is diligently enforcing the obligations of Borders thereunder, Borrower shall be deemed to be in compliance with the requirements of this subparagraph. Borrower at all times shall keep the Property and ground water of the Property free of Hazardous Materials (as hereinafter defined) to the extent required by applicable governmental agencies and free of any liens arising in connection therewith. Borrower shall not and shall not knowingly permit its tenants or any third party requiring the consent of Borrower to enter the Property, to use, generate, manufacture, treat, store, release, threaten release, transport on or over, emit or dispose of Hazardous Materials in, on, over, under or about the Property including the ground water of the Property in violation of any federal, regional, state or local law, code, ordinance, statute, rule, regulation, decision or order currently in existence or hereafter enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Borrower shall give Lender prompt Written Notice (as hereinafter defined) of any claim by any person, entity, or governmental agency that a significant release or disposal of Hazardous Materials has occurred in, on, over, under or about the Property, including the ground water of the Property, in excess of those permitted by the Hazardous Waste Laws, whether caused by the Borrower, any tenant or any third party. Borrower, through its professional engineers and at Borrower's sole cost, shall promptly and thoroughly investigate any suspected release of Hazardous Materials in, on, over, under or about the Property, including the ground water of the Property. Borrower shall forthwith remove, repair, remediate, clean up, and/or detoxify any Hazardous Materials found in, on, over, under or about the Property or in the ground water of the Property to the extent such actions are required by any applicable Hazardous Waste Laws, and whether or not Borrower was responsible for the existence of the Hazardous Materials in, on, over, under or about the Property or the ground water of the Property. "HAZARDOUS MATERIALS" shall include, but not be limited to, substances defined as "hazardous substances," "hazardous materials," or "toxic substances" under any Hazardous Waste Laws. (b) In addition, Borrower shall not incorporate any underground storage tanks into the Real Property without the prior written consent of Lender, and shall insure that Oklahoma City, Oklahoma 7 all tanks currently on the Real Property comply with current Hazardous Waste Laws and underground storage tank regulations and are properly registered. Borrower hereby agrees to indemnify and defend Lender and hold Lender harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses, fines, fees, suits, actions, debts, obligations, and claims of any and every kind whatsoever, including Reasonable Attorneys' Fees (collectively, "LOSSES") paid, incurred or suffered by, or asserted against, Lender for, with respect to, or as a direct or indirect result of, the presence in, on, over, under or about, or the escape, seepage, leakage, spillage, discharge, emission or release from, the Property of any Hazardous Materials (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Hazardous Waste Laws), regardless of the source of origination and whether or not caused by, or within the control of, Borrower and including any claims of Lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(b) and similar provisions in this Mortgage and the other Loan Documents concerning Hazardous Materials shall survive repayment of the Note and satisfaction of this Mortgage; provided, however, Borrower shall have no liability under this Section 3(b) regarding Hazardous Materials if either (i) the Property becomes contaminated subsequent to Lender's acquisition of the Property by foreclosure, acceptance by Lender of a deed in lieu thereof, or subsequent to any transfer of ownership of the Property which was approved or authorized by Lender in writing, pursuant to this Mortgage, provided that such transferee assumes in writing all of the obligations of Borrower with respect to Hazardous Materials pursuant to the Loan Documents, or (ii) at such time Borrower provides Lender with an environmental assessment report acceptable to Lender, in Lender's sole discretion, showing the Property to be free of Hazardous Materials and not in violation of any Hazardous Waste Laws. The burden of proof under this Section 3(b) with regard to establishing the date upon which any Hazardous Materials was released in, on, over, under or about the Property shall be upon Borrower. (c) Borrower at all times shall maintain the Property in full compliance with all federal, state, county, regional or local laws, codes, ordinances, rules, regulations, decisions and orders currently in existence or hereafter enacted or rendered, governing accessibility for the disabled, including but not limited to: The Architectural Barriers Act of 1968; The Rehabilitation Act of 1973; The Fair Housing Act of 1988; and The Americans with Disabilities Act (collectively, the "ACCESSIBILITY LAWS"). Borrower hereby agrees to indemnify and defend Lender and hold Lender harmless from and against any and all Losses paid, incurred or suffered by, or asserted against Lender for, with respect to, or as a direct or indirect result of, the non-compliance of the Property with the Accessibility Laws whether or not caused by, or within the control of, Borrower, and Oklahoma City, Oklahoma 8 including any claims of Lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(c) and similar provisions in this Mortgage and the other Loan Documents concerning Accessibility Laws shall survive repayment of the Note and satisfaction of this Mortgage; provided, however, Borrower shall not be liable under this Section 3(c) for compliance with any Accessibility Laws if such Accessibility Laws first become effective, or such violations result from alterations or improvements to the Property that are performed subsequent to Lender's acquisition of the Property by foreclosure or acceptance of a deed in lieu thereof or subsequent to any transfer which was approved or authorized by Lender pursuant to this Mortgage, provided that such transferee assumes in writing all obligations pertaining to the Accessibility Laws pursuant to this Mortgage and the other Loan Documents. The burden of proof under this Section 3(c) with regard to establishing the date upon which such non-compliance with any Accessibility Laws occurred at the Property shall be upon Borrower. (d) Lender, and/or its agents, shall have the right and shall be permitted, subject to the rights of Borders under the Borders Lease, but shall not be required, at all reasonable times, to enter upon and inspect the Property to insure compliance with the foregoing covenants, and any and all other terms, covenants, conditions and agreements set forth in this Mortgage. 4. PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Borrower shall pay, or cause to be paid, all taxes, assessments and other charges as already levied or assessed, or that may be hereafter levied or assessed, upon or against the Property, when the same shall become due and payable according to Law, before delinquency, and before any interest or penalty shall attach thereto, and to deliver official receipts evidencing the payment of the same to Lender not later than thirty (30) days following the payment of the same. Borrower shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, the proposed assessment of ad valorem taxes or special assessments by governmental authorities having jurisdiction over the Property; provided, however, Borrower shall give Written Notice of its intent to bring such an action to Lender, and Lender may, in its sole discretion, require Borrower to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Mortgage) as a result of Borrower's act. 5. PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Borrower shall immediately pay and discharge from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, realtors, brokers and others which, if unpaid, might result in, or permit the creation of, a lien, charge or encumbrance upon the Property or any part thereof, or on the Rents, arising therefrom and, in general, to do or cause to be done everything necessary so that the lien of this Mortgage shall be fully Oklahoma City, Oklahoma 9 preserved, at the sole cost of Borrower, without expense to Lender. Borrower shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, mechanics', materialmens' and other such liens filed against the Property; provided however, that Borrower shall give Written Notice to Lender of its intent to bring such action, and Lender may, in Lender's sole discretion, require Borrower to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Mortgage) as a result of Borrower's act. 6. PAYMENT OF JUNIOR ENCUMBRANCES. Borrower shall permit no default or delinquency under any other lien, imposition, charge or encumbrance against the Property, even though junior and inferior to the lien of this Mortgage; provided however, the foregoing shall not be construed to permit any such additional lien or encumbrance against the Property, other than the Permitted Exceptions. 7. PAYMENT OF MORTGAGE TAXES. Borrower shall pay any and all taxes which may be levied or assessed directly or indirectly upon the Note and/or this Mortgage (except for income taxes payable by Lender) or the Loan, without regard to any Law which may be hereafter enacted imposing payment of the whole or any part thereof upon Lender, its successors or assigns. Upon violation of this covenant, or upon the rendering by any court of competent jurisdiction of a decision that such a covenant by Borrower is legally inoperative, or if any court of competent jurisdiction shall render a decision that the rate of said tax when added to the rate of interest provided for in the Note exceeds the then maximum rate of interest allowed by Law, then, and in any such event, the debt hereby secured shall, at the option of Lender, its successors or assigns, become immediately due and payable, anything contained in this Mortgage or in the Note notwithstanding, without the imposition of a Prepayment Premium (as defined in the Note). The additional amounts which may become due and payable hereunder shall become a part of the Loan secured by this Mortgage. 8. HAZARD INSURANCE. Borrower shall continuously, during the term of this Mortgage, keep the Improvements, Appurtenances, and Fixtures and Personal Property, now or hereafter existing, erected, installed and located in or upon the Real Property, insured with extended coverage insurance against loss or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine subsidence, acts of terrorism, and such other hazards, casualties, contingencies and perils including, without limitation, other risks insured against by persons operating like properties in the locality of the Property, or otherwise deemed necessary or advisable by Lender or any Rating Agency (as hereinafter defined), on such forms and with such deductibles as may be required by Lender or any Rating Agency, covering the Property in the amount of the full replacement cost thereof, (without taking into account any depreciation) less excavating and foundation costs, and covering all loss or abatement of rental or other income, without a provision for co-insurance, in an amount equal to the scheduled rental income of the Property for at least twelve (12) months, or if applicable, business interruption insurance in an amount sufficient to pay debt service on the Note, operating expenses, taxes Oklahoma City, Oklahoma 10 and insurance on the Property for a period of twelve (12) months, and covering loss by flood (if the Property lies in a Special Flood Hazard Area as designated on the Department of Housing and Urban Development's Maps, or other flood prone designation) in an amount equal to the outstanding principal balance of the Loan or such other amount as approved by Lender, and earthquake insurance with a deductible amount of no more than ten percent (10%) of the policy amount if, in the judgment of Lender's inspecting architect, the Property lies in an area of anticipated significant seismic activity, and "Ordinance or Law Coverage" or "Enforcement" endorsements in amounts satisfactory to Lender if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses or the ability to rebuild the Improvements is restricted or prohibited, and comprehensive boiler and machinery insurance (without exclusion for explosion), if applicable, in amounts as shall be reasonably required by Lender or any Rating Agency and covering all boilers or other pressure vessels, machinery and equipment located at or about the Property (including, without limitation, electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping). All such insurance shall be carried with a company or companies licensed to do business in the State, which is acceptable to Lender, which company or companies shall have a rating at the time this Mortgage is executed equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Each such policy of insurance shall contain a noncontributing loss payable clause in favor of and in a form acceptable to Lender, and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, non-renew, cancel or terminate the policy or policies, or the expiration of such policies of insurance, or the exclusion of any individual risk such as acts of terrorism. If the insurance required under this Section 8 or any portion thereof is maintained pursuant to a blanket policy, Borrower shall furnish to Lender a certified copy of such policy, together with an original Evidence of Insurance Certificate (Acord Form 27) for hazard insurance indicating that Lender is an additional insured under such policy in regard to the Property and showing the amount of coverage apportioned to the Property, which coverage shall be in an amount sufficient to satisfy the requirements hereof. Not less than fifteen (15) days prior to the expiration dates of each policy required of Borrower hereunder, Borrower will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Borrower, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. For so long as the Borders Lease remains in effect with Borders as the tenant thereunder, then to the extent that Borders self-insures to satisfy its insurance obligations under the Borders Lease, Lender shall accept such self-insurance as satisfying the obligation of Oklahoma City, Oklahoma 11 Borrower to provide insurance under this Section 8, provided that (i) Borders, or the guarantor of the Borders Lease, Borders Group, Inc., maintains a minimum net worth of not less than Two Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance otherwise satisfies the requirements of this Section 8 as to the amount required to be maintained by Borders, and (iii) Borrower provides to Lender written verification of such coverage in form and substance reasonably acceptable to Lender. Notwithstanding the foregoing, Lender shall have the right to require Borrower to maintain in effect a separate policy of liability insurance with respect to the Property meeting the requirements of Section 9 of this Mortgage. In the event of loss covered by insurance maintained by Borrower with respect to the Property, including, without limitation, insurance covering hazards, casualties, contingencies and perils for which insurance has been required by Lender hereunder, Borrower shall give immediate notice thereof to Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an interest for Lender to, at its option, make proof of loss and/or to file a claim thereunder. Each insurance company concerned is hereby notified, authorized and directed to make payment for such loss directly to Lender, instead of to Borrower and Lender jointly, and Borrower hereby authorizes Lender to adjust and compromise any losses for which insurance proceeds are payable under any of the aforesaid insurance policies and, after deducting the costs of collection, to apply the proceeds of such insurance, at its option either: (a) to the restoration or repair of the insured Improvements, Appurtenances, and Fixtures and Personal Property, provided that, in the opinion and sole discretion of Lender, such restoration or repair is reasonably practical and, provided further, that, in the opinion and sole discretion of Lender, either: (i) the insurance proceeds so collected are sufficient to cover the cost of such restoration or repair of the damage or destruction with respect to which such proceeds were paid, or (ii) the insurance proceeds so collected are not sufficient alone to cover the cost of such restoration or repair, but are sufficient therefor when taken together with funds provided and made available by Borrower from other sources; in which event Lender shall make such insurance proceeds available to Borrower for the purpose of effecting such restoration or repair; but Lender shall not be obligated to see to the proper application of such insurance proceeds nor shall the amount of funds so released or used be deemed to be payment of or on account of the Loan; or (b) to the reduction of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured, in which event such proceeds shall be applied at par against the Loan and the monthly payment due on account of such Loan shall be reduced accordingly as calculated by Lender. None of such actions taken by Lender shall be deemed to be or result in a waiver or impairment of any equity, lien or right of Lender under and by virtue of this Mortgage, nor will the application of such insurance proceeds to the reduction of the Loan serve to cure any default in the payment thereof. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Borrower in and to any insurance policies then in force including any rights to unearned premiums and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. Oklahoma City, Oklahoma 12 In case of Borrower's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Borrower's sole expense. Notwithstanding anything set forth in this Section 8 to the contrary, in the event of loss or damage to the Property by fire or other casualty covered by insurance maintained by Borrower with respect to the Property, including, without limitation, insurance which has been required by Lender hereunder and provided by Borrower, and the amount of such loss or damage does not exceed twenty-five percent (25%) of the unpaid principal balance of the Note, Lender hereby agrees to allow the proceeds of insurance to be used for the restoration of the Property and to release such insurance proceeds to Borrower as such restoration progresses, provided: (a) Borrower is not in default under any of the terms, covenants and conditions of this Mortgage, the Note or any of the other Loan Documents; (b) The Improvements, after such restoration, shall be at least eighty percent (80%) leased pursuant to leases approved in writing by Lender; (c) The plans and specifications for the restoration of the Property are approved in writing by Lender in advance; (d) At all times during such restoration, Borrower has deposited with Lender funds which, when added to the insurance proceeds received by Lender, are sufficient to complete the restoration of the Property in accordance with the approved plans and specifications, and all applicable building codes, zoning ordinances, regulations and Accessibility Laws, and further, that the funds retained by Lender are sufficient to complete the restoration of the Property as certified to Lender by Lender's inspecting architect/engineer; (e) Borrower provides suitable completion, payment and performance bonds, builders' all risk insurance, and all necessary licenses and permits for such restoration in form and amount acceptable to Lender; (f) The insurer under such policies of fire or other casualty insurance does not assert any defense to payment under such policies against Lender, Borrower, any tenant, or third party of Borrower with regard to the Property; (g) Lender shall have the option, upon the completion of such restoration of the Property, to apply any surplus insurance proceeds remaining after the completion of such restoration, at par, to the reduction of the outstanding principal balance of the Note; notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured; Oklahoma City, Oklahoma 13 (h) The funds held by Lender shall be disbursed no more often than once per month and in not more than five (5) increments of not less than Fifty Thousand Dollars ($50,000) each, except the final disbursement of such funds which may be in an amount less than Fifty Thousand Dollars ($50,000); (i) Lender's obligation to make any such disbursement shall be conditioned upon Lender's receipt of written certification from Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender by Borrower) that all construction and work for which such disbursement is requested has been completed in accordance with the approved plans and specifications and in accordance with all applicable building codes, zoning ordinances and all other Laws and, further, that Borrower has deposited with Lender sufficient funds to complete such restoration in accordance with Section 8(d); (j) In the reasonable judgment of the Lender, the Property can be restored within six months after insurance proceeds are made available and at least six months prior to the Maturity Date (as defined in the Note) to an economic unit not less valuable (including an assessment by Lender of the impact of the termination of any Occupancy Leases (as hereinafter defined) due to such casualty) and not less useful than the same was prior to the casualty, and after such restoration will adequately secure the outstanding balance of the Loan; and (k) Lender shall be entitled to require and to impose such other conditions to the release of such funds as would be customarily or reasonably be required and imposed by institutional mortgage lenders for a project of similar nature and cost. In the event of a casualty, provided that Borrower is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 8 to the contrary, Lender shall make insurance proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. 9. LIABILITY INSURANCE. Borrower shall carry and maintain such commercial general liability insurance as may from time to time be required by Lender or any Rating Agency, taking into consideration the type of property being insured and the corresponding liability exposure, on forms, with deductibles, in amounts and with such company or companies licensed to do business in the State and as may be acceptable to Lender. All such commercial general liability insurance shall be carried with a company or companies which have and maintain a rating equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and all renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with a Certificate of Insurance (Acord Form 25S) and receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Such policy or policies of insurance shall name Lender as an additional insured and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to Oklahoma City, Oklahoma 14 modify, cancel, non-renew, or terminate the policy or policies or the expiration of such policy or policies of insurance, or the exclusion of any individual risk such as acts of terrorism. Not less than fifteen (15) days prior to the expiration dates of each policy or policies required of Borrower hereunder, Borrower will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Borrower, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Borrower's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Borrower's sole expense. 10. COMPLIANCE WITH LAWS. (a) Borrower shall observe, abide by and comply with all federal, regional, state and local laws, codes, ordinances, statutes, rules, regulations, decisions, orders, requirements or decrees relating to the Property enacted, promulgated or issued by any federal, state, county or local governmental or quasi-governmental authority or any agency or subdivision thereof having jurisdiction over Borrower or the Property, which now or hereafter affect Borrower or the Property, including Hazardous Waste Laws and Accessibility Laws (collectively, the "LAWS"), and to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning, variances, special exceptions and nonconforming uses), privileges, franchises and concessions which are applicable to the Property, or which have been granted to or contracted for by Borrower in connection with any existing, presently contemplated or future uses of the Property. (b) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Mortgage and the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Borrower shall deliver to Lender such certifications or other evidence from time to time throughout the term of this Mortgage, as requested by Lender in its sole discretion, that (i) Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true: Oklahoma City, Oklahoma 15 (1) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. 11. MAINTENANCE OF PERMITS. Borrower shall obtain, keep and constantly maintain in full force and effect during the entire term of this Mortgage, all certificates, licenses and permits necessary to keep the Property operating for the Existing Use and, except as specifically provided for in this Mortgage, not to assign, transfer or in any manner change such certificates, licenses or permits without first receiving the written consent of Lender. 12. OBLIGATIONS OF BORROWER AS LESSOR. (a) Borrower shall perform every obligation of Borrower (as the landlord) and enforce every obligation of the tenant in any and every lease, license or other occupancy agreement of or affecting the Property or any part thereof (the "OCCUPANCY LEASES"), and not modify, alter, waive or cancel any such Occupancy Leases or any part thereof or rights thereunder, without the prior written consent of Lender (but such consent shall not be required for such action as to Occupancy Leases of three thousand (3,000) square feet or less if such action is in the ordinary course of business of owning and operating the Property in a prudent and business-like manner, on then current market terms), nor collect for more than thirty (30) days in advance of the date due any Rents that may be collectible under any such Occupancy Leases and, except as provided for in this Mortgage, not assign any such Occupancy Lease(s) or any such Rents relating thereto, to any party other than Lender, without the prior written consent of Lender. Borrower will notify Lender in writing of any default under any Occupancy Lease. In the event of default under any such Occupancy Lease by reason of failure of Borrower to keep or perform one or more of the covenants, agreements or conditions thereof, Lender is hereby authorized and empowered, and may, at its sole option, remedy, remove or cure any such default, and further, Lender may, at its sole option and in its sole discretion but without obligation to do so, pay any sum of money deemed necessary by Lender for the performance of said covenants, agreements and conditions, or for the curing or removal of any such default, and incur all expenses and obligations which Lender may consider necessary or reasonable in connection therewith, and Borrower shall repay on demand all such sums so paid or advanced by Lender together with interest thereon until paid at the lesser of either: (i) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (ii) the then applicable interest rate of the Note plus five Oklahoma City, Oklahoma 16 hundred (500) basis points per annum; all of such sums, if unpaid, shall be added to and become part of the Loan. (b) All such Occupancy Leases hereafter made shall be subject to the approval of Lender and: (i) shall be at competitive market rental rates then prevailing in the geographic area for projects used for the Existing Use comparable to the Property; (ii) shall have lease terms of not less than three years; and (iii) at Lender's option, shall be superior or subordinate in all respects to the lien of this Mortgage. Provided, however, that Lender shall not require approval in advance of any Occupancy Leases which conform to the Borrower's Form Lease (as hereinafter defined) as previously approved by Lender, except as set forth below. Neither the right nor the exercise of the right herein granted unto Lender to keep or perform any such covenants, agreements or conditions as aforesaid shall preclude Lender from exercising its option to cause the whole Loan to become immediately due and payable by reason of Borrower's default in keeping or performing any such covenants, agreements or conditions. (c) Lender has approved a form of Occupancy Lease to be used by Borrower in connection with the Property (the "FORM LEASE"). Borrower shall not, without the prior written consent of Lender, modify or alter the Form Lease in any material respect. In addition, Borrower shall not, without the prior written consent of Lender, surrender, terminate, modify or alter, either orally or in writing, any Occupancy Lease now existing or hereafter made with any Major Tenant (as hereinafter defined) for all or part of the Property, permit an assignment or sublease of any such Occupancy Lease, or request or consent to the subordination of any Occupancy Lease to any lien subordinate to this Mortgage. Borrower shall furnish Lender with copies of all executed Occupancy Leases of all or any part of the Property now existing or hereafter made, and Borrower shall assign to Lender (which assignment shall be in form and content acceptable to Lender), as additional security for the Note and the Loan, all Occupancy Leases now existing or hereafter made for all or any part of the Property. (d) Notwithstanding the foregoing approval by Lender of Borrower's Form Lease, Lender hereby specifically reserves the right to approve all prospective tenants under all Occupancy Leases hereafter proposed to be made if either: (i) the term thereof, excluding options to renew the same, exceeds five years; or (ii) the net rentable area to be occupied thereunder, including expansion options, exceeds ten percent (10%) of the net leasable area of each of the buildings comprising the Improvements (the tenants under such leases being hereinafter referred to as "MAJOR TENANTS"). Borrower shall notify Lender in writing of all prospective Major Tenants, and shall deliver to Lender, at Borrower's sole cost and expense, a copy of the prospective Major Tenant's current financial statement and the most recent Dun & Bradstreet credit report on said prospective Major Tenant. The financial statement delivered to Lender hereunder shall be certified as true and correct by the Major Tenant, or, if available, by a certified public accountant. Oklahoma City, Oklahoma 17 (e) In no event shall Borrower exercise any right to relocate any tenant outside the Property pursuant to any right set forth in an Occupancy Lease without the prior written consent of Lender. 13. MAINTENANCE OF PARKING & ACCESS PROHIBITION AGAINST ALTERATION; SEPARATE TAX LOT. (a) Borrower shall construct, keep and constantly maintain, as the case may be, all curbs, drives, parking areas and the number of parking spaces heretofore approved by Lender, or heretofore or hereafter required by any Laws or any governmental body, agency or authority having jurisdiction over Borrower or the Property, and as required by the terms of the Occupancy Leases, and not to alter, erect, build or construct upon any portion of the Property, any building, structure or improvement of any kind whatsoever, the erection, building or construction of which has not been previously approved by Lender in writing, which approval shall be at the sole discretion of Lender. (b) Borrower shall cause the Property to remain separately assessed for real estate tax purposes as a separate tax lot or lots. 14. EXECUTION OF ADDITIONAL DOCUMENTS. Borrower shall do, make, execute, acknowledge, witness and deliver all deeds, conveyances, mortgages, deeds of trust, assignments, estoppel certificates, subordination non-disturbance and attornments, notices of assignments, transfers, assurances, security agreements, financing statements and renewals thereof, and all other instruments or other acts necessary, as Lender shall from time to time require for the purpose of better assuring, conveying, assigning, transferring, securing and confirming unto Lender the Property and rights hereby encumbered, created, conveyed, assigned or intended now or hereafter so to be encumbered, created, conveyed or assigned, or which Borrower may now be or may hereafter become bound to encumber, create, convey or assign to Lender, or for the purpose of carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage, and to pay all filing, registration or recording fees and all taxes, costs and other expenses, including Reasonable Attorneys' Fees, incident to the preparation, execution, acknowledgment, delivery and recordation of any of the same. By signing this Mortgage, Borrower authorizes Lender to file such financing statements, with or without the signature of Borrower, as Lender may elect, as may be necessary or desirable to perfect the lien of Lender's security interest in the Fixtures and Personal Property. Without limiting any other provision herein, Borrower hereby authorizes Lender to file one or more financing statements and any renewal or continuation statements thereof, describing the Property and the proceeds of the Property, including, without limitation, a financing statement covering "all assets of Borrower all proceeds therefrom, and all rights and privileges with respect thereto." Borrower further authorizes Lender to file, with or without any additional signature from Borrower, as Lender may elect, such amendments and continuation statements as Lender may deem Oklahoma City, Oklahoma 18 necessary or desirable from time to time to perfect or continue the lien of Lender's security interest in the Fixtures and Personal Property. Borrower hereby ratifies any financing statements that may have been filed by Lender in advance of the date hereof to perfect Lender's security interest in the Fixtures and Personal Property. 15. AFTER-ACQUIRED PROPERTY SECURED. Borrower shall subject to the lien of this Mortgage all right, title and interest of Borrower in and to all extensions, improvements, betterments, renewals, substitutions and replacements of, and all additions and appurtenances to, the Property hereinabove described, hereafter acquired by or released to Borrower, or constructed, assembled or placed by Borrower on the Real Property, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, encumbrance, conveyance, assignment or other act by Borrower, as fully, completely and with the same effect as though now owned by Borrower and specifically described herein, but at any and all times, Borrower will execute and deliver to Lender any and all such further assurances, mortgages, deeds of trust, conveyances, security agreements, financing statements or assignments thereof or security interests therein as Lender may reasonably require for the purpose of expressly and specifically subjecting the same to the lien of this Mortgage. 16. PAYMENTS BY LENDER ON BEHALF OF BORROWER. Borrower shall make payment of any taxes, assessments or public charges on or with respect to the Property before the same shall become delinquent, or to make payment of any insurance premiums or other charges, impositions, or liens herein or elsewhere required to be paid by Borrower, or if Borrower shall fail so to do, then Lender, at its sole option, but without obligation to do so, may make payment or payments of the same and also may redeem the Property from tax sale without any obligation to inquire into the validity of such taxes, assessments, charges, impositions or liens. In the case of any such payment by Lender, Borrower agrees to reimburse Lender, upon demand therefor, the amount of such payment and of any fees and expenses attendant in making the same, together with interest thereon at the lesser of either: (a) the highest rate of interest then allowed by the Laws of the State or, if controlling, the Laws of the United States, or (b) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; and until paid such amounts and interest shall be added to and become part of the Loan to the same extent that this Mortgage secures the repayment of the Loan. In making payments authorized by the provisions of this Section 16, Lender may do so whenever, in Lender's sole judgment and discretion, such advance or advances are necessary or desirable to protect the full security intended to be afforded by this Mortgage. Neither the right nor the exercise of the rights herein granted to Lender to make any such payments as aforesaid shall preclude Lender from exercising its option to cause the Loan to become immediately due and payable by reason of Borrower's default in making such payments as hereinabove required. Oklahoma City, Oklahoma 19 17. FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this Mortgage, Borrower shall deposit with Lender, together with and in addition to each monthly payment due on account of the Loan, an amount equal to one-twelfth (1/12th) of the annual total of such taxes, assessments, insurance premiums and other charges (all as estimated by Lender in its sole discretion) so that, at least thirty (30) days prior to the due date thereof, Lender shall be able to pay in full all such taxes, assessments, insurance premiums and other charges as the same shall become due. Lender may hold the sums so deposited without paying interest, commingle same with its general funds and/or apply the same to the payment of said taxes, assessments, insurance premiums or other charges as they become due and payable. If at any time the funds so held by Lender are insufficient to pay such taxes, assessments, insurance premiums or other charges as they become due and payable, Borrower shall immediately, upon Written Notice and demand by Lender, deposit with Lender the amount of such deficiency. The failure on the part of Borrower to do so shall entitle Lender, at Lender's sole option, to make such payments in accordance with the rights and pursuant to the conditions elsewhere provided in this Mortgage. Borrower hereby grants to Lender a security interest in all funds deposited with Lender, and such funds are hereby pledged by Borrower to Lender for the purpose of securing all indebtedness and obligations secured by this Mortgage. Whenever any default exists under this Mortgage, Lender may, at Lender's sole option but without an obligation so to do, apply any funds so held by Lender pursuant to this Section 17 toward the payment of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured, in such order and manner of application as Lender may elect. 18. CONDEMNATION; EMINENT DOMAIN. All claims and rights of action for, and all awards and other compensation heretofore or hereafter made to Borrower and all subsequent owners of the Property in any taking by eminent domain, recovery for inverse condemnation or by deed in lieu thereof, whether permanent or temporary, of all or any part of the Property or any easement or any appurtenance thereto, including severance and consequential damages and change in grade of any way, street, avenue, road, alley, passage or public place, are hereby assigned to Lender. Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, and authorizes, directs and empowers Lender, at the option of Lender as said attorney-in-fact, on behalf of Borrower, its successors and assigns, to adjust or compromise the claim for any such award, and alone to collect and receive the proceeds thereof, to give proper receipts and acquittances therefor and, after deducting any expenses of collection, Lender shall at its sole option either: (a) apply the net proceeds as a credit upon any portion of the Loan, as selected by Lender, notwithstanding the fact that the amount owing thereon may not then be due and payable, or that the Loan is otherwise adequately secured. In the event Lender applies such awards to the reduction of the outstanding Loan evidenced by the Note, such proceeds shall be applied at par, and the monthly installments due and payable under the Note shall be Oklahoma City, Oklahoma 20 reduced accordingly as calculated by Lender; however no such application shall serve to cure an existing default of Borrower; or (b) hold said proceeds without any allowance of interest, and make the same available for restoration or rebuilding of the Improvements. In the event that Lender makes said proceeds available to reimburse Borrower for the cost of the restoration or rebuilding of the Improvements on the Real Property, such proceeds shall be made available in the manner and under the same conditions as required under Section 8 hereof. If the proceeds are made available by Lender to reimburse Borrower for the cost of said restoration or rebuilding, any surplus which may remain out of said award after payment of such cost of restoration or rebuilding, shall be applied on account of the Loan at par notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured. In the event of a taking or condemnation, provided that Borrower is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 18 to the contrary, Lender shall make condemnation proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. Borrower further covenants and agrees to give Lender immediate notice of the actual or threatened commencement of any proceedings under eminent domain, and to deliver to Lender copies of any and all papers served in connection with any such proceedings. Borrower further covenants and agrees to make, execute and deliver to Lender, at any time or times, upon request, free, clear and discharged of any encumbrance of any kind whatsoever, any and all further assignments and/or other instruments deemed necessary by Lender for the purpose of validly and sufficiently assigning all such awards and other compensation heretofore or hereafter made to Lender (including the assignment of any award from the United States government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for payment thereof). It shall be a default hereunder if either: (i) any part of any of the Improvements situated on the Real Property shall be condemned by any governmental authority having jurisdiction; or (ii) lands constituting a portion of the Real Property shall be condemned by any governmental authority having jurisdiction, such that the remaining Property is in violation of applicable parking, zoning, platting, or other ordinances, or fails to comply with the terms of the Occupancy Leases with Major Tenants. In either of said events, Lender shall be entitled to exercise any or all remedies provided or referenced in this Mortgage or the other Loan Documents, including the application of condemnation proceeds to the outstanding principal balance of the Note at par, and the right to accelerate the maturity date of the Note and require payment in full without the imposition of a Prepayment Premium (as defined in the Note). Oklahoma City, Oklahoma 21 19. COSTS OF COLLECTION. In the event that the Note is placed in the hands of an attorney for collection, or in the event that Lender shall become a party either as plaintiff or as defendant, in any action, suit, appeal or legal proceeding (including, without limitation, foreclosure, condemnation, bankruptcy, administrative proceedings or any proceeding wherein proof of claim is by law required to be filed), hearing, motion or application before any court or administrative body in relation to the Property or the lien and security interest granted or created hereby or herein, or for the recovery or protection of the Loan or the Property, or for the foreclosure of this Mortgage, or for the enforcement of the terms and conditions of the Loan Documents, Borrower shall indemnify, save, defend and hold Lender harmless from and against any and all Losses incurred by Lender on account thereof, and Borrower shall repay, on demand, all such Losses, together with interest thereon until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums, if unpaid, shall be added to and become a part of the Loan. 20. DEFAULT RATE. Any sums not paid when due, whether maturing by lapse of time or by reason of acceleration under the provisions of the Note, this Mortgage or any of the other Loan Documents, and whether principal, interest or money owing for advancements pursuant to the terms of this Mortgage or any other Loan Document, shall bear interest until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums shall be added to and become a part of the Loan. 21. SAVINGS CLAUSE. Notwithstanding any provisions in the Note or in this Mortgage to the contrary, the total liability for payments in the nature of interest, including but not limited to Prepayment Premiums, default interest and late payment charges, shall not exceed the limits imposed by the Laws of the State or, if controlling, the Laws of the United States, relating to maximum allowable charges of interest. Lender shall not be entitled to receive, collect or apply, as interest on the Loan, any amount in excess of the maximum lawful rate of interest permitted to be charged by any Laws. In the event Lender ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be applied to reduce the unpaid principal balance of the Loan evidenced by the Note. If the unpaid principal balance of such Loan has been paid in full, any remaining excess shall be forthwith returned to Borrower. 22. BANKRUPTCY, REORGANIZATION OR ASSIGNMENT. (a) It shall be a default hereunder if Borrower or any general partner or managing member of Borrower shall: (a) elect to dissolve or liquidate its business organization or wind up its business affairs without receiving the prior written approval of Oklahoma City, Oklahoma 22 Lender; (b) consent to the appointment of a receiver, trustee or liquidator of all or a substantial part of its assets; (c) be adjudicated as bankrupt or insolvent, or file a voluntary petition in bankruptcy, or admit in writing its inability to pay its debts as they become due; (d) make a general assignment for the benefit of creditors; (e) file a petition under or take advantage of any insolvency law; (f) file an answer admitting the material allegations of a petition filed against Borrower or any general partner or managing member of Borrower in any bankruptcy, reorganization or insolvency proceeding, or fail to cause the dismissal of such petition within thirty (30) days after the filing of said petition; (g) take action for the purpose of effecting any of the foregoing; or (h) if any order, judgment or decree shall be entered upon an application of a creditor of Borrower or any general partner or managing member of Borrower by a court of competent jurisdiction approving a petition seeking appointment of a receiver or trustee of all or a substantial part of Borrower's assets or any of Borrower's general partner's or managing member's assets and such order, judgment or decree shall continue unstayed and in effect for a period of thirty (30) days. (b) Borrower covenants and agrees that it has not and shall not: (i) engage in any business or activity other than the acquisition, ownership, operation and maintenance of the Property, and activities incidental thereto; (ii) acquire or own any material asset other than (1) the Property, and (2) such incidental Fixtures and Personal Property as may be necessary for the operation of the Property; (iii) merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent; (iv) fail to preserve its existence as an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Borrower's Governing Documents (as hereafter defined); (v) own any subsidiary or make any investment in or acquire the obligations or securities of any other person or entity without the consent of Lender; (vi) commingle its assets with the assets of any of its partner, members, shareholders, affiliates, or of any other person or entity or transfer any assets to any such person or entity other than distributions on account of equity interests in the Borrower permitted hereunder and properly accounted for; Oklahoma City, Oklahoma 23 (vii) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation, other than the Affiliate Loans), other than the Loan, except unsecured trade and operational debt incurred with trade creditors in the ordinary course of its business of owning and operating the Property in such amounts as are normal and reasonable under the circumstances, provided that such debt is not evidenced by a note and is paid when due and provided in any event the outstanding principal balance of such debt shall not exceed at any one time 1% of the outstanding Loan. Borrower shall not be deemed in default of the foregoing restrictions by virtue of any guaranty or cross default agreement delivered by Borrower with respect to the Affiliate Loans; (viii) allow any person or entity to pay its debts and liabilities (except a Guarantor (as hereinafter defined) - or in connection with the cross-default and cross collateralization of the Affiliate Loans) or fail to pay its debts and liabilities solely from its own assets; (ix) fail to maintain its records, books of account and bank accounts separate and apart from those of the shareholders, partners, members, principals and affiliates of Borrower, the affiliates of a shareholder, partner or member of Borrower, and any other person or entity or fail to prepare and maintain its own financial statements in accordance with generally accepted accounting principles and susceptible to audit, or if such financial statements are consolidated fail to cause such financial statements to contain footnotes disclosing that the Property is actually owned by the Borrower; (x) enter into any contract or agreement with any shareholder, partner, member, principal or affiliate of Borrower, any guarantor of all or a portion of the Loan (a "GUARANTOR") or any shareholder, partner, member, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any shareholder, partner, member, principal or affiliate of Borrower or Guarantor, or any shareholder, partner, member, principal or affiliate thereof; (xi) seek dissolution or winding up, in whole or in part; (xii) fail to correct any known misunderstandings regarding the separate identity of Borrower; (xiii) hold itself out to be responsible or pledge its assets or credit worthiness for the debts of another person or entity or allow any person or entity to hold itself out to be responsible or pledge its assets or credit worthiness for the debts of the Borrower (except for a Guarantor); Oklahoma City, Oklahoma 24 (xiv) make any loans or advances to any third party, including any shareholder, partner, member, principal or affiliate of Borrower, or any shareholder, partner, member, principal or affiliate thereof, except as may be required in connection with the cross default and cross collateralization of the Affiliate Loans; (xv) fail to file its own tax returns, if required under applicable law, or to use separate contracts, purchase orders, stationary, invoices and checks, except that Borrower may file a consolidated tax return with Agree Limited Partnership for reporting purposes; (xvi) fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (1) to mislead others as to the entity with which such other party is transacting business, or (2) to suggest that Borrower is responsible for the debts of any third party (including any shareholder, partner, member, principal or affiliate of Borrower, or any shareholder, partner, member, principal or affiliate thereof); (xvii) fail to allocate fairly and reasonably among Borrower and any third party (including, without limitation, any Guarantor) any overhead for common employees, shared office space or other overhead and administrative expenses; (xviii) allow any person or entity to pay the salaries of its own employees or fail to maintain a sufficient number of employees for its contemplated business operations; (xix) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xx) share any common logo with or hold itself out as or be considered as a department or division of (1) any shareholder, partner, principal, member or affiliate of Borrower, (2) any affiliate of a shareholder, partner, principal, member or affiliate of Borrower, or (3) any other person or entity or allow any person or entity to identify the Borrower as a department or division of that person or entity; or (xxi) conceal assets from any creditor, or enter into any transaction with the intent to hinder, delay or defraud creditors of the Borrower or the creditors of any other person or entity; Oklahoma City, Oklahoma 25 23. TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It is understood by Borrower that time is of the essence hereof in connection with all obligations of Borrower herein and any of the other Loan Documents. Lender, at its sole option, may declare the Loan, as well as all other monies secured or evidenced hereby or by any of the other Loan Documents, including, without limitation, all Prepayment Premiums (to the extent permitted by the Laws of the State) and late payment charges, to be in default and forthwith due and payable, in the event: (1) Borrower defaults in the payment of any monthly installment of the Note, whether of principal or interest, or both, or in the payment of any other sums of money referred to herein or in the Note, the Borrower Cross-Default Guaranty or in any of the other Loan Documents, promptly and fully when the same shall be due, without notice or demand from Lender to Borrower in regard to such Monetary Default (as hereinafter defined), and any such Monetary Default remains uncured for a period of five (5) days after Written Notice thereof has been given by Lender to Borrower, unless Lender has previously given Borrower such Written Notice for a failure to pay in the then-current Loan Year (as defined in the Note), in which event no such notice need be given and no right to cure need be afforded Borrower as to any further Monetary Default during such Loan Year. (2) Borrower breaches or defaults on any of the terms, covenants, conditions and agreements of the Note, the Borrower Cross-Default Guaranty, this Mortgage, or any other Loan Documents; or in the event that each and every one of said terms, covenants, conditions and agreements is not otherwise either duly, promptly and fully discharged or performed, and any such Non-Monetary Default (as hereinafter defined) remains uncured for a period of thirty (30) days after Written Notice thereof has been delivered from Lender to Borrower; unless such Non-Monetary Default cannot be cured within said thirty (30) day period, in which event Borrower shall have a reasonable period of time to complete cure, provided that action to cure such Non-Monetary Default is promptly commenced within said thirty (30) day period, and Borrower is, in Lender's sole judgment, not diminishing or impairing the value of the Property, and is diligently pursuing a cure to completion, but in no event longer than ninety (90) days. (3) Any representation or warranty of Borrower or of its members, general partners, principals, affiliates, agents or employees, or of any Guarantor made herein or in or in any other Loan Document, in any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made. Oklahoma City, Oklahoma 26 (4) Any seizure or forfeiture of the Property, or any portion thereof, or Borrower's interest therein, resulting from criminal wrongdoing or other unlawful action of Borrower, its affiliates, or any tenant in the Property under any federal, state or local law. (5) If Borrower consummates a transaction which would cause this Mortgage or Lender's exercise of its rights under this Mortgage, the Note or the other Loan Documents to constitute a nonexempt prohibited transaction under ERISA or result in a violation of a state statute regulating governmental plans, subjecting Lender to liability for a violation of ERISA or a state statute. (6) Any default occurs in the performance of any covenant or obligation of Borrower or any other party under any indemnity or guaranty delivered to Lender in connection with the Loan and such default continues beyond the expiration of applicable notice and cure periods. (7) Any default occurs under any Affiliate Loan which default continues beyond the expiration of applicable notice and cure periods. Upon the occurrence of any one of the above events, and at the option of Lender, the principal of and the interest accrued on the Loan and all other sums secured by this Mortgage and the other Loan Documents shall immediately become due and payable as if all of said sums of money were originally stipulated to be paid on such day. In addition, Lender may avail itself of all rights and remedies provided by law or equity, and may foreclose or prosecute a suit at law or in equity as if all monies secured hereby had matured prior to its institution, anything in this Mortgage or any of the other Loan Documents to the contrary notwithstanding. Lender shall have no obligation to give Borrower notice of, or any period to cure, any Monetary Default or any Incurable Default (as hereinafter defined) prior to exercising its rights, powers, privileges and remedies. As used herein, the term "MONETARY DEFAULT" shall mean any default which can be cured by the payment of money such as, but not limited to, the payment of principal and interest due under the Note, or the payment of taxes, assessments and insurance premiums when due as provided in this Mortgage. As used herein, the term "NON-MONETARY DEFAULT" shall mean any default that is not a Monetary Default or an Incurable Default. As used herein, the term "INCURABLE DEFAULT" shall mean either: (i) any voluntary or involuntary sale, assignment, mortgaging, encumbering or transfer in violation of the covenants contained herein or any of the other Loan Documents; or (ii) if Borrower, or any person or entity comprising Borrower or any guarantor or indemnitor of the Loan, should breach any of the provisions of Section 22. Oklahoma City, Oklahoma 27 24. FORECLOSURE. Upon the occurrence of a default hereunder, Lender may institute an action to foreclose this Mortgage as to the amount so declared due and payable, and thereupon the Property (or any portion thereof) shall be sold according to law to satisfy and pay the same, together with all costs, expenses and allowances thereof, including, without limitation, Reasonable Attorneys' Fees. The Property may be sold in one parcel, several parcels or groups of parcels, and Lender shall be entitled to bid at the sale, and, if Lender is the highest bidder for the Property or any part or parts thereof, Lender shall be entitled to purchase the same. The failure or omission on the part of Lender to exercise the option for acceleration of maturity of the Note and foreclosure of this Mortgage following any default as aforesaid or to exercise any other option or remedy granted hereunder to Lender when entitled to do so in any one or more instances, or the acceptance by Lender of partial payment of the Loan, whether before or subsequent to Borrower's default hereunder, shall not constitute a waiver of any such default or the right to exercise any such option or remedy, but such option or remedy shall remain continuously in force. Acceleration of the maturity of the Note, once claimed hereunder by Lender, at the option of Lender, may be rescinded by written acknowledgment to that effect by Lender, but the tender and acceptance of partial payments alone shall not in any way either affect or rescind such acceleration of maturity, nor act as a waiver, accord and satisfaction, modification, novation or similar defense. 25. UCC REMEDIES. (a) This Mortgage constitutes a Security Agreement under the UCC with respect to any part of the Property that may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate, 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: (1) No financing statement covering any of the Property or any proceeds thereof is on file in any public office; and Borrower will, at its cost and expense, upon demand, furnish to Lender such further information and will execute and deliver to Lender such financing statements and other documents in form reasonably satisfactory to Lender and will do all such acts and things as Lender 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 Property as security for the Loan, subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or desirable; (2) The terms and provisions contained in this section and in Section 25(b) of this Mortgage shall, unless the context otherwise requires, have the meanings and be construed as provided in the UCC; Oklahoma City, Oklahoma 28 (3) This Mortgage constitutes a security agreement and financing statement under the UCC with respect to the Property. As such, this Mortgage covers any portion of the Property that is personal property including all items which are to become fixtures. Borrower is the "Debtor" and Lender is the "Secured Party" (as those terms are defined and used in the UCC) insofar as this Mortgage constitutes a financing statement. (b) Upon the occurrence of a default, Lender may exercise its rights of enforcement with respect to the Fixtures and Personal Property under the UCC, and in conjunction with, in addition to or in substitution for those rights and remedies: (1) Written Notice mailed to Borrower as provided herein ten (10) days prior to the date of public sale of the Fixtures and Personal Property or prior to the date after which private sale of the Fixtures and Personal Property will be made shall constitute reasonable notice; (2) any sale made pursuant to the provisions of this Section shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Mortgaged Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Fixtures and Personal Property hereunder as is required for such sale of the Mortgaged Property under power of sale; (3) in the event of a foreclosure sale, whether made under the terms hereof, or under judgment of a court, the Fixtures and Personal Property and the Mortgaged Property may, at the option of Lender, be sold as a whole; (4) it shall not be necessary that Lender take possession of the Fixtures and Personal Property or any part thereof prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that the Fixtures and Personal Property or any part thereof be present at the location of such sale; (5) prior to application of proceeds of disposition of the Fixtures and Personal Property to the secured indebtedness, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the Reasonable Attorneys' Fees and other legal expenses incurred by Lender; (6) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the indebtedness or as to the occurrence of any default, or as to Lender Oklahoma City, Oklahoma 29 having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Lender, shall be taken as prima facie evidence of the truth of the facts so stated and recited; (7) Lender may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the sending of notices and the conduct of the sale, but in the name and on behalf of Lender; and (8) this Mortgage covers Goods (as defined by the UCC) which are or are to become Fixtures related to the Real Property, and covers As-Extracted Collateral related to the Real Property. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records in the Office of the County Clerk where the Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement As-Extracted Collateral with respect to all As-Extracted Collateral included within the Real Property (including, without limitation, all oil, gas, other minerals, and other substances of value which may be extracted from the earth and all accounts arising out of the sale at the wellhead or minehead thereof), and is to be filed for record in the real estate records of the county where the Property is situated. The mailing address of Borrower is set forth in Section 43 of this Mortgage and the address of Lender from which information concerning the security interest may be obtained is the address of Lender set forth in Section 43 of this Mortgage. 26. PROTECTION OF LENDER'S SECURITY. At any time after default hereunder, Lender, or Lender's agents or contractors, is authorized, without notice and in Lender's sole discretion, to enter upon and take possession of the Property or any part thereof, and to perform any acts which Lender deems necessary or proper to conserve the security interest herein intended to be provided by the Property, to operate any business or businesses conducted thereon, and to collect and receive all Rents thereof and therefrom, including those past due as well as those accruing thereafter. 27. APPOINTMENT OF RECEIVER. If, at any time after a default hereunder, Lender deems, in Lender's sole discretion, that a receivership may be necessary to protect the Property or its Rents, whether before or after maturity of the Note and whether before or at the time of or after the institution of foreclosure or suit to collect the Loan or to enforce this Mortgage or any of the other Loan Documents, Lender, as a matter of strict right and regardless of the value of the Property or the amounts due hereunder or secured hereby, or of Oklahoma City, Oklahoma 30 the solvency of any party bound for the payment of such indebtedness, shall have the right, upon ex parte application and without notice to anyone, and by any court having jurisdiction, to the appointment of a receiver to take charge of, manage, preserve, protect and operate the Property, to collect the Rents thereof, to make all necessary and needful repairs, and to pay all taxes, assessments, insurance premiums and other such charges against and expenses of the Property, and to do such other acts as may by such court be authorized and directed, and after payment of the expenses of the receivership and the management of the Property, to apply the net proceeds of such receivership in reduction of the Loan or in such other manner as the said court shall direct notwithstanding the fact that the amount owing thereon may not then be due and payable or the said Loan is otherwise adequately secured. Such receivership shall, at the option of Lender, continue until full payment of all sums hereby secured or until title to the Property shall have passed by sale under this Mortgage. Borrower hereby specifically waives its right to object to the appointment of a receiver as aforesaid, and hereby expressly agrees that such appointment shall be made as an admitted equity and as a matter of absolute right to Lender. 28. RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The rights and remedies herein provided are cumulative, and Lender, as the holder of the Note and of every other obligation secured hereby, may recover judgment thereon, issue execution therefor and resort to every other right or remedy available at law or in equity, without first exhausting any right or remedy available to Lender and without affecting or impairing the security of any right or remedy afforded hereby, and no enumeration of special rights or powers by any provisions hereof shall be construed to limit any grant of general rights or powers, or to take away or limit any and all rights granted to or vested in Lender by law or equity. Borrower further agrees that no delay or omission on the part of Lender to exercise any rights or powers accruing to it hereunder shall impair any such right or power, or shall be construed to be a waiver of any such default hereunder or an acquiescence therein; and every right, power and remedy granted herein or by law or equity to Lender may be exercised from time to time as often as Lender deems expedient. Lender may resort to any security given by this Mortgage or to any other security now existing or hereafter given to secure the payment of the Loan, in whole or in part, and in such portions and in such order as may seem best to Lender in its sole discretion, and any such action shall not be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Mortgage. To the full extent Borrower may do so, Borrower agrees that Borrower will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force pertaining to the rights and remedies of sureties or providing for any stay, extension or redemption, and Borrower, for Borrower and Borrower's heirs, devisees, representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by law, hereby waives and releases all rights of redemption, stay of execution, notice of intention to mature or declare due the whole of the Oklahoma City, Oklahoma 31 secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of the assets of Borrower, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and security interests hereby created. Borrower shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right of Lender under the terms of this Mortgage to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right of Lender under the terms of this Mortgage to the payment of such indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. If any law referred to in this Section and now in force, of which Borrower or Borrower's heirs, devisees, representatives, successors and assigns and such other persons claiming any interest in the Property might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. 29. MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without notice and without regard to the consideration, if any, paid therefor, and notwithstanding the existence at that time of any inferior mortgages, deeds of trust, or other liens thereon, may release any part of the security described herein, or may release any person or entity liable for the Loan without in any way affecting the priority of this Mortgage, to the full extent of the Loan remaining unpaid hereunder, upon any part of the security not expressly released. Lender may, at its option and within Lender's sole discretion, also agree with any party obligated on the Loan, or having any interest in the security described herein, to extend the time for payment of any part or all of the Loan, and such agreement shall not, in any way, release or impair this Mortgage, but shall extend the same as against the title of all parties having any interest in said security, which interest is subject to this Mortgage. 30. PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the Property shall be Borrower, or such other manager as may be first approved in writing by Lender. The exclusive leasing agent of the Property, if other than Borrower or the foregoing party, shall be first approved in writing by Lender. The management and leasing contracts (or in the absence of any such written contract, a letter so stating and further identifying the name of the person or entity charged with the responsibility for managing and/or leasing the Property) shall be subordinate to this Mortgage, and satisfactory to and subject to the prior written approval of Lender throughout the term of the Loan. Upon default in either of these requirements, then the whole of the Loan hereby secured shall, at the election of Lender, become immediately due and payable, together with any Prepayment Premium, late payment charges and all other sums required by the Note or the other Loan Documents, and Lender shall be entitled to exercise any or all remedies provided for or referenced in this Mortgage. 31. MODIFICATION NOT A WAIVER. In the event Lender (a) releases, as aforesaid, any part of the security described herein or any person or entity liable for the Loan; Oklahoma City, Oklahoma 32 (b) grants an extension of time for the payment of the Note; (c) takes other or additional security for the payment of the Note; or (d) waives or fails to exercise any rights granted herein, in the Note, or any of the other Loan Documents, any said act or omission shall not release Borrower, subsequent purchasers of the Property or any part thereof, or makers, sureties, endorsers or guarantors of the Note, if any, from any obligation or any covenant of this Mortgage, the Note or any of the other Loan Documents, nor preclude Lender from exercising any right, power or privilege herein granted or intended to be granted in the event of any other default then made, or any subsequent default. 32. TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER; ASSUMPTION. Except as set forth in Section 38(b) hereof, without the prior written consent of Lender, the sale, transfer, assignment or conveyance of all or any portion of the Property, or the transfer, assignment or conveyance of a controlling interest in Borrower or its general partner or managing member, or any guarantor, whether voluntary or by operation of law, without the prior written consent of Lender, shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to accelerate all sums due on the Note, together with any Prepayment Premiums (to the extent permitted by the Laws of the State), late payment charges or any other amounts secured hereby. Lender may, however, elect to waive the option to accelerate granted hereunder if, prior to any such sale, transfer, assignment or conveyance of the Property, the following conditions shall be fully satisfied: (a) Lender acknowledges in writing that, in Lender's sole discretion, the creditworthiness of the proposed transferee and the ability and experience of the proposed transferee to operate the Property are satisfactory to Lender, (b) Lender and the proposed transferee shall enter into an agreement in writing that (i) the rate of interest payable on the Loan shall be at such rate as Lender shall determine, (ii) the repayment schedule as set forth in the Note shall be modified by Lender, in Lender's sole discretion, to initiate amortization or modify the existing amortization schedule in order to amortize the then remaining unpaid principal balance of the Note over a period of time as determined by Lender, in Lender's sole discretion, without a change in the maturity date of the Note, and (iii) the proposed transferee shall assume all obligations of Borrower under the Note, this Mortgage and the other Loan Documents in writing and an assumption fee, to be determined by Lender in Lender's sole discretion, may be charged by Lender; (c) Lender shall receive, for Lender's review and approval, copies of all transfer documents; and (d) Borrower or the transferee shall pay all costs and expenses in connection with such transfer and assumption, including, without limitation, all fees and expenses incurred by Lender. Borrower, or any subsequent owner of the Property or any portion thereof, shall do all things necessary to preserve and keep in full force and effect its and their legal existence, franchises, rights and privileges as a corporation, partnership or limited liability company, as the case may be, under the laws of the State of its formation and its right to own property and transact business in the State. It shall be a default hereunder if Borrower, or any subsequent owner of the Property or any portion thereof, shall amend, modify, transfer, assign or terminate the applicable governing documents for such entity, including its partnership Oklahoma City, Oklahoma 33 agreement, certificate of partnership, operating agreement, articles of organization, regulations, articles of incorporation or bylaws, as the case may be (as applicable, the "GOVERNING DOCUMENTS"), of Borrower or such subsequent owner without the prior written consent of Lender. Borrower, or such subsequent owner of the Property, shall provide Lender with copies of any proposed amendment to its applicable Governing Documents, so that Lender may, in Lender's sole discretion, determine whether such amendment adversely affects Lender, the Property or the security value thereof. Provided, however, that any amendment, modification, transfer, assignment or termination of Borrower's applicable Governing Documents or any other action pursuant to which the current general partner or managing member of Borrower shall either: (i) cease to be the general partner or managing member of Borrower; or (ii) except to the extent permitted herein, cease to own or maintain a partnership or membership interest in Borrower equal to or greater than its partnership or membership interest at the time this Mortgage is executed, shall be deemed to have a material adverse effect upon Lender and the Property, and shall be a default hereunder. Borrower shall not change its name or identity in any manner which may make any financing or continuation statement filed in connection with the Loan seriously misleading within the meaning of the UCC enacted in the State or change its jurisdiction of organization unless Borrower shall have delivered to Lender written notice thereof not less than 30 days before the effective date of such change and shall have taken all action which Lender determines to be reasonably necessary or desirable to confirm and protect Lender's security interests and rights under this Mortgage and the perfection and priority thereof. Borrower will not change its principal places of business unless it shall have given Lender prior written notice of its intent to do so not less than thirty (30) days in advance of the effective date of such change. Borrower shall bear all costs incurred by Lender in connection with any such change including, without limitation, Reasonable Attorney's Fees. In the event the ownership of the Property, or any part thereof, shall become vested in a person or entity other than Borrower, whether with or without the prior written consent of Lender, Lender may, without notice to Borrower, deal with such successor or successors in interest with reference to the Property, this Mortgage and the other Loan Documents, in the same manner and to the same extent as with Borrower without in any way vitiating or discharging Borrower's liability hereunder or under any of the Loan Documents. No sale, transfer or conveyance of the Property, no forbearance on the part of Lender and no extension of time given by Lender to Borrower for the payment of the Note shall operate to release, discharge, modify, change or affect the original liability of Borrower, either in whole or in part, unless expressly set forth in writing executed by Lender. Notwithstanding anything contained herein to the contrary, Borrower hereby waives any right it now has or may hereafter have to require Lender to prove an impairment of its security as a condition to the exercise of Lender's rights under this Section 32. Oklahoma City, Oklahoma 34 A sale, transfer, assignment or conveyance within the meaning of this Section shall be deemed to include, but not be limited to, (a) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (b) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a tenant under an Occupancy Lease or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any leases or any Rents; (c) if Borrower, any guarantor, any indemnitor, or any general partner or managing member of Borrower, is a corporation, the voluntary or involuntary sale, conveyance, transfer or pledge of such corporation's stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise), or the creation or issuance of new stock by which an aggregate of more than ten percent (10%) of such corporation's stock shall be vested in a party or parties who are not now stockholders; and (d) if Borrower, any guarantor, indemnitor, or any general partner or managing member of Borrower, is a limited partnership, general partnership, limited liability partnership, limited liability company, or joint venture, the change, removal or resignation of a general partner, managing partner, or member, or the transfer or pledge of the interest of any general partner, managing partner, or member or any profits or proceeds relating to such interest. Nothing in this Mortgage shall be construed to limit or restrict the transfer of shares of Agree Realty Corporation. Notwithstanding anything contained in this Section 32 to the contrary, as long as no default, or event which, with notice or the passage of time or both, could result in a default, has occurred hereunder, under the Note or any of the other Loan Documents, Lender shall permit one (1) bona fide arm's length transfer of the Property to another borrowing entity without a change in the terms of the Loan; provided, however, that no such transfer shall be valid or permitted hereunder unless: (i) Lender receives prior Written Notice of such proposed transfer; (ii) such proposed transferee and any substitute guarantor has been approved in writing by Lender (taking into consideration such factors as transferee's creditworthiness, business experience, financial condition and managerial capabilities); (iii) the transferee's (and its sole general partner's or managing member's) single purpose and bankruptcy remote character are satisfactory to Lender in its sole discretion; (iv) Lender has obtained such other legal opinions regarding substantive consolidation issues, enforceability of the assumption documents, no adverse impact on the Securities or any REMIC holding the Note and similar matters as Lender may require, (v) the execution and delivery to Lender of a written assumption agreement covering the Note this Mortage, the Borrower Cross-Default Guaranty and the other Loan Documents and/or substitute guaranty (in Lender's sole and absolute discretion) and such modifications to the Loan Documents executed by such parties and containing such terms and conditions as Lender may require in its sole and absolute discretion prior to such sale or transfer (provided that in the event the Loan is included in a REMIC and is a performing Loan, no modification to the terms and conditions shall be made or permitted that would cause (A) any adverse tax consequences to the REMIC or any holders of any Mortgage-Backed Pass-Through Securities, (B) this Mortgage to fail to be a Qualifying Security Instrument under applicable federal law relating to REMIC's, or (C) result in a Oklahoma City, Oklahoma 35 taxation of the income from the Loan to the REMIC or cause a loss of REMIC status), (vi) if applicable, the delivery to Lender of an endorsement (at Borrower's sole cost and expense) to Lender's policy of title insurance then insuring the lien created by this Mortgage in form and substance acceptable to Lender in its sole judgment; (vii) Lender is paid a cash assumption fee in accordance with the following schedule: Two percent (2%) of the then outstanding principal balance of the Note if such outstanding principal balance is less than or equal to Three Million Dollars ($3,000,000.00), one and one-half percent (1 1/2%) of the then outstanding principal balance of the Note if such outstanding principal balance is in excess of Three Million Dollars ($3,000,000.00); (viii) Borrower pays all fees and expenses incurred by Lender in connection with such transfer and assumption, including, without limitation, inspection and investigation fees, title insurance charges, and Reasonable Attorneys' Fees; (ix) Lender approves the management agreement and leasing agreement, and the management and leasing company to be employed by the proposed transferee; and (x) the transferee is simultaneously purchasing each of the Properties which secure the Affiliate Loans, to the extent such Affiliate Loans remain outstanding. Any transfer of all or any portion of the Property which does not strictly comply with the terms and conditions of the foregoing shall be a default hereunder, and shall entitle Lender to exercise all rights and remedies provided in this Mortgage and the other Loan Documents. This one-time right of transfer shall apply to the Borrower named herein and not to any subsequent owner of the Property. 33. FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the Note remains unpaid, Borrower shall not, either voluntarily or involuntarily, permit the Property or any part thereof to become subject to any secondary or subordinate lien, mortgage, deed of trust, security interest or encumbrance of any kind whatsoever without the prior written consent of Lender, and the imposition of any such secondary lien, mortgage, deed of trust, security interest or encumbrance without the approval of Lender shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to declare the outstanding principal balance of the Note, all accrued and unpaid interest thereon, Prepayment Premiums (to the extent permitted by the laws of the State, late payment charges and any other amounts secured hereby to be and become immediately due and payable in full. In the event that Lender shall hereafter give its written consent to the imposition of any such secondary lien, mortgage, deed of trust, security interest or other encumbrance upon the Property, Lender, at Lender's sole option, shall be entitled to accelerate the maturity of the Note and exercise any and all remedies provided and available to Lender hereunder and in the other Loan Documents in the event that the holder of any such secondary lien or encumbrance shall institute foreclosure or other proceedings to enforce the same; it being understood and agreed that a default under any instrument or document evidencing, securing or secured by any such secondary lien or encumbrance shall be and constitute a default hereunder. In the event all or any portion of the proceeds of the Loan are used for the purpose of retiring debt or debts secured by prior liens on the Property, Lender shall be subrogated to the rights and lien priority of the holder or holders of the lien or liens so discharged. Oklahoma City, Oklahoma 36 34. CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Borrower agrees that the making of any oil, gas or mineral lease, or the sale or conveyance of any mineral interest or right to explore for minerals under, through or upon the Property, would impair the value of the Property, and that Borrower shall have no right, power or authority to lease the Property, or any part thereof, for oil, gas or other mineral purposes, or to grant, assign or convey any mineral interest of any nature, or the right to explore for oil, gas and other minerals, without first obtaining Lender's express written permission therefor, which permission shall not be valid until recorded among the Public Records of the county in which the Property is located. Borrower further agrees that if Borrower shall make, execute, or enter into any such lease or attempt to grant any such mineral rights without such prior written permission of Lender, then Lender shall have the option, without notice, to declare the same to be a default hereunder, and to declare the Loan immediately due and payable in full. Whether or not Lender shall consent to such lease or grant of mineral rights, Lender shall receive the entire consideration to be paid for any such lease or grant of mineral rights, with the same to be applied to the Loan notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan is otherwise adequately secured; provided, however, that the acceptance of such consideration shall in no way impair the lien of this Mortgage on the Property or cure any existing Monetary Default. 35. ESTOPPEL CERTIFICATION BY BORROWER. Borrower, upon request of Lender therefor made either personally or by mail, shall certify in writing to Lender (or any party designated by Lender), in a form satisfactory to Lender or such designee, the amount of principal and interest then outstanding under the terms of the Note and any other sums due and owing under this Mortgage or any of the other Loan Documents, and whether any offsets or defenses exist against the Loan. Such certification shall be made by Borrower within ten (10) days if the request is made personally, or within twenty (20) days if the request is made by mail. 36. CROSS-DEFAULT. The Note is also secured by the terms, conditions and provisions of the Assignment, by three Cross-Default Guaranty Agreements of even date herewith from Agree - Milestone Center Project, L.L.C., as guarantor for the Agree-Milestone Loan; Agree - Columbia Crossing Project, L.L.C., as guarantor for the Agree-Columbia Loan; and Omaha, respectively in favor of Lender (hereinafter individually or collectively referred to as the "AFFILIATED ENTITY CROSS-DEFAULT GUARANTYS") and, additionally, may be secured by contracts or agreements of guaranty or other security instruments. The terms, covenants, conditions and agreements of each security instrument shall be considered a part hereof as fully as if set forth herein verbatim. Any default under this Mortgage, any Affiliated Entity Cross-Default Guaranty or any of the other Loan Documents shall constitute a default hereunder and under each of the other Loan Documents. Notwithstanding the foregoing, the enforcement or attempted enforcement of this Mortgage or any of the other Loan Documents now or hereafter held by Lender shall not prejudice or in any manner affect the right of Lender to enforce any other Loan Document; it being understood Oklahoma City, Oklahoma 37 and agreed that Lender shall be entitled to enforce this Mortgage and any of the other Loan Documents now or hereafter held by it in such order and manner as Lender, in its sole discretion, shall determine. 37. EXAMINATION OF BORROWER'S RECORDS. Borrower will maintain complete and accurate books and records showing in detail the income and expenses of the Property, and will permit Lender and its agents, contractors or representatives to examine said books and records and all supporting vouchers and data during normal business hours and from time to time upon request by Lender, in such place as such books and records are customarily kept. Borrower will furnish to Lender, within one hundred twenty (120) days after the close of each respective fiscal period annual and quarterly financial statements (income statements and a balance sheet) for the Borrower and the Property. Borrower will furnish to Lender on or before 45 calendar days after the end of each calendar quarter the following items, each certified by Borrower as being true and correct, in such format and in such detail as Lender or its servicer may request: (a) a written statement (rent roll) dated as of the last day of each such calendar quarter identifying each of the Occupancy Leases by the term, space occupied, rental required to be paid (including percentage rents and tenant sales), security deposit paid, any rental concessions, all rent escalations, any rents paid more than one month in advance, any special provisions or inducements granted to tenants, any taxes, maintenance and other common charges paid by tenants, all vacancies and identifying any defaults or payment delinquencies thereunder; and (b) quarterly and year-to-date operating statements prepared for each calendar quarter during each such reporting period detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow. These statements shall be in form acceptable to Lender and its servicer, shall be prepared in accordance with generally accepted accounting principles, and shall include a rent roll, certified as true and correct by Borrower. The statements shall show in detail all income derived from and expenses incurred in connection with the ownership of the Property, including current annual sales figures for all Major Tenants of the Property if required under the Major Tenant leases or if such financial information is otherwise available. Borrower shall deliver to Lender, for Borrower, or any entity with whom Borrower's tax return is consolidated, copies of all income tax returns, requests for extension and other similar items contemporaneously with its delivery of same to the Internal Revenue Service. In the event Borrower fails to provide such statements to Lender within the time prescribed above, Borrower shall pay Lender the sum of $200.00 in administrative expenses for each successive month for which the statements are delinquent (or in the case of such statements to be delivered prior to the transfer of the Loan to Investor (hereafter defined), for each successive week for which the statements are delinquent). Upon a default hereunder, Lender shall have the right to require that said financial statements be audited and certified by a certified public accountant acceptable to Lender, at the sole cost and expense of Borrower. Oklahoma City, Oklahoma 38 Prior to the transfer of the Loan to Investor by Lender, Borrower shall deliver to Lender the reports required above on a monthly basis. Such reports shall be delivered within ten calendar days after the end of each calendar month. In addition, at the request of Lender, but in no case more often than once a quarter nor more than three (3) times during the term of the Loan, unless a default has occurred, Borrower shall furnish to Lender (i) unaudited financial statements (balance sheet, income statement, cash flow statement and current rent roll) covering operation of the Property for periods other than those set forth in the preceding paragraph and (ii) unaudited financial statements (balance sheets, income statements, and cash flow statements) for Borrower, its general partner(s), shareholder(s) or member(s) (whichever is applicable) and for such other principals of Borrower as designated by Lender, provided that for so long as the Property is held by Borrower such statements shall be required only for Borrower and Agree Realty Corporation. All such statements shall be certified to Lender to be complete, correct, and accurate by the individual (for an individual's statements) or by an authorized representative of the entity (if statements are for a partnership, corporation or limited liability company). Any inspection or audit of the Property or the books and records of Borrower, or the procuring of documents and financial and other information, by or on behalf of Lender, shall be at Borrower's expense and shall be for Lender's protection only, and shall not constitute any assumption of responsibility or liability by Lender to Borrower or anyone else with regard to the condition, construction, maintenance or operation of the Property, nor Lender's approval of any certification given to Lender nor relieve Borrower of any of Borrower's obligations. 38. ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED. Borrower covenants and agrees to permit or suffer none of the following without the prior written consent of Lender: (a) Any structural alteration of, or addition to, the Improvements now or hereafter situated upon the Real Property, or the addition of any new buildings or other structure(s) thereto, other than the erection or removal of non-load bearing interior walls or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect; or (b) The removal, transfer, sale or lease of the Property, except that the removal, replacement or substitution of fixtures, equipment, machinery, apparatus and articles of personal property (replacement or substituted items must be of like or better quality than the removed items in their original condition) encumbered hereby may be made in the normal course of business; or (c) The use of any of the Improvements now or hereafter situated on the Real Property for any purpose other than the Existing Use and related facilities, or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect. Oklahoma City, Oklahoma 39 39. FUTURE ADVANCES SECURED. This Mortgage shall secure not only existing indebtedness, but also future advances, whether such advances are obligatory or to be made at the option of Lender. Upon the request of Borrower, and at Lender's option prior to release of this Mortgage, Lender may make future advances to Borrower. All future advances with interest thereon shall be secured by this Mortgage to the same extent as if such future advances were made on the date of the execution of this Mortgage unless the parties shall agree otherwise in writing, but the total secured indebtedness shall not exceed at any one time a maximum principal amount equal to double the face amount of the Note plus interest and costs of collection, including court costs and Reasonable Attorneys' Fees. Any advances or disbursements made for the benefit or protection of or the payment of taxes, assessments, levies or insurance upon the Property, with interest on such disbursements as provided herein, shall be added to the principal balance of the Note and collected as a part thereof. To the extent that this Mortgage may secure more than one note, a default in the payment of any such mortgage note shall constitute a default in the payment of all such notes. 40. EFFECT OF SECURITY AGREEMENT. Borrower agrees to, and shall upon the request of Lender, execute and deliver to Lender, in form and content satisfactory to Lender, such financing statements, descriptions of property and such further assurances as Lender, in Lender's sole discretion, may from time to time consider necessary to create, perfect, continue and preserve the lien and encumbrances hereof, and the security interest granted herein, upon and in the Property. Without the prior written consent of Lender, Borrower shall not create or suffer to be created, pursuant to the UCC, any other security interest in such real and personal property and fixtures described herein. Upon the occurrence of a default hereunder or Borrower's breach of any other covenants or agreements between the parties entered into in conjunction herewith, Lender shall have the remedies of a secured party under the UCC as provided in Section 25, and at Lender's option, the remedies provided for in this Mortgage and the other Loan Documents. Lender, at the expense of Borrower, may cause such statements, descriptions and assurances, as herein provided in this Section 40, and this Mortgage, to be recorded and re-recorded, filed and refiled, at such times and in such places as may be required or permitted by law to so create, perfect and preserve the lien and encumbrance hereof upon all of the Property. 41. TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions of the Application for Mortgage Loan dated August 28, 2003, and any subsequent amendments thereto (the "APPLICATION"), executed by and between Borrower and Lender, are incorporated herein by reference. All terms, covenants, conditions and agreements of the Application not expressly set forth in this Mortgage and any of the other Loan Documents shall survive the execution and delivery hereof, and remain in full force and effect. In the event any conflict exists between the terms, covenants, conditions and agreements of the Application and the Loan Documents, the terms, covenants, conditions and agreements of the Loan Documents shall prevail. Oklahoma City, Oklahoma 40 42. SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof shall be binding upon Borrower and the heirs, personal representatives, trustees, successors and assigns of Borrower, and shall inure to the benefit of Lender, its successors and assigns. Where more than one Borrower is named herein, the obligations and liabilities of said Borrower shall be joint and several. Wherever used in this Mortgage, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein: (a) the word "Borrower" shall mean Borrower and/or any subsequent owner or owners of the Property; (b) the word "Lender" shall mean Lender or any subsequent holder or holders of this Mortgage; (c) the word "Note" shall mean the Note(s) secured by this Mortgage; and (d) the word "person" shall mean an individual, trustee, trust, corporation, partnership, limited liability corporation, limited liability partnership, joint venture or unincorporated association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean fees charged by attorneys selected by Lender based upon such attorneys' then prevailing hourly rates as opposed to any statutory presumption specified by any statute then in effect in the State. As used herein words of any gender shall include all other genders. 43. NOTICES. All notices, reports, requests or other written instruments required or permitted hereunder, shall be in writing, signed by the party giving or making the same, and shall be sent hand-delivered, effective upon receipt, sent by United States Express Mail or by a nationally recognized overnight courier, effective upon receipt, or sent by United States registered or certified mail, postage prepaid, with return receipt requested, deemed effective on the earlier of the day of actual delivery as shown by the addressee's return receipt or the expiration of three business days after the date of mailing, addressed to the party intended to receive the same at the address set forth below or at such other address as shall be given in writing by any party to another ("WRITTEN NOTICE"): If to Borrower: OKLAHOMA CITY STORE NO. 151 L.L.C. 31850 Northwestern Highway Farmington Hills, Michigan 48334 Attention: Mr. Richard Agree If to Lender: NATIONWIDE LIFE INSURANCE COMPANY One Nationwide Plaza Columbus, Ohio 43215-2220 Attention: Real Estate Investment Department, 34T 44. GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. BORROWER AND LENDER, EACH TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND Oklahoma City, Oklahoma 41 VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM WHICH ANY PARTY MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, BORROWER WAIVES ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Mortgage and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the internal laws of the State, without regard to principles of conflicts of laws. The parties hereto irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Mortgage may be brought in a court of record in the State or in the courts of the United States of America located in such State, (b) consent to the non-exclusive jurisdiction of each such court in any suit, action or proceeding, and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. If any clauses or provisions herein contained operate, or would prospectively operate, to invalidate this Mortgage, then such clauses or provisions only shall be held for naught, as though not herein contained, and the remainder of this Mortgage shall remain operative and in full force and effect. 45. RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising under the terms, covenants, conditions and agreements contained in this Mortgage shall be separate, distinct and cumulative, and none of them shall be in exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provisions, anything herein or otherwise to the contrary notwithstanding. If Borrower is comprised of more than one person or entity, then the liability of each such person and entity hereunder shall be joint and several. 46. MODIFICATIONS. This Mortgage cannot be changed, altered, amended or modified except by an agreement in writing and in recordable form, executed by both Borrower and Lender. Oklahoma City, Oklahoma 42 47. EXCULPATION. Notwithstanding anything contained herein to the contrary, the liability of Borrower is subject to the limited recourse provisions contained in the Exculpation section of the Note, which are incorporated herein and made a part hereof by reference as if fully set forth herein. 48. FULL RECOURSE. Notwithstanding any provisions in this Mortgage to the contrary, including without limitation the provisions set forth in the section captioned "Exculpation" hereinabove, Borrower shall be personally liable, jointly and severally, for the entire Loan secured by this Mortgage (including all principal, interest and other charges) in the event (a) Borrower violates the covenant governing the placing of subordinate financing on the Property as set forth in this Mortgage; (b) Borrower violates the covenant restricting transfers of interests in the Property or transfers of ownership interests in Borrower as set forth in this Mortgage; or (c) Borrower or any guarantor violates the provisions of Section 22 of this Mortgage, or there is filed against Borrower or any guarantor or indemnitor of the Loan, a petition in bankruptcy or for the appointment of a receiver, or there commences under any bankruptcy or insolvency law, proceedings for Borrower's relief, or for the compromise, extension, arrangement or adjustment of Borrower's obligations which is not dismissed within thirty (30) days after the filing of same. 49. LENDER IS NOT A JOINT VENTURER OR PARTNER. Borrower and Lender acknowledge and agree that in no event shall Lender be deemed to be a partner or joint venturer with Borrower or any member of Borrower. Without limitation of the foregoing, Lender shall not be deemed to be a partner or joint venturer on account of its becoming a mortgagee in possession or exercising any rights pursuant to this Mortgage or pursuant to any other instrument or document evidencing or securing any of the indebtedness secured hereby, or otherwise. 50. CAPTIONS. The captions set forth at the beginning of the various Sections of this Mortgage are for convenience only, and shall not be used to interpret or construe the provisions of this Mortgage. 51. SPLITTING OF MORTGAGE. This Mortgage and the Note shall, at any time until the same shall be fully paid and satisfied, at the sole election of Lender, be split or divided into two or more notes and two or more security instruments, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Borrower, upon written request of Lender, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Lender and/or its designee or designees substitute notes and security instruments in such principal amounts, aggregating not more than the then unpaid principal amount of Loan, and containing terms, provisions and clauses similar to those contained herein and in the Note, and such other documents and instruments as may be required by Lender. Oklahoma City, Oklahoma 43 52. REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, Borrower, at its expense, will issue, in lieu thereof, a replacement Note or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor. 53. SOLE DISCRETION OF LENDER. Wherever pursuant to this Mortgage Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 54. TRANSFER OF LOAN. (a) Lender may, at any time, sell, transfer or assign the Note, this Mortgage, the Assignment and the other Loan Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "SECURITIES"), or otherwise sell the Loan or an interest therein (a "SECONDARY MARKET TRANSACTION"). Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor in such Securities or in connection with a Secondary Market Transaction or any Rating Agency rating such Securities (collectively, the "INVESTOR") and each prospective Investor, all documents and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, any Guarantor and the Property, whether furnished by Borrower, any Guarantor or otherwise, as Lender determines necessary or desirable. Borrower acknowledges that certain information regarding the Loan and the parties thereto and the Property may be included in a private placement memorandum, prospectus or other disclosure documents. The term "RATING AGENCY" shall mean each statistical rating agency that has assigned a rating to the Securities. (b) Borrower shall cooperate in good faith with Lender in effecting any such Secondary Market Transaction and shall cooperate in good faith to implement all requirements reasonably imposed by the participants involved in any Secondary Market Transaction (including without limitation, a Rating Agency and/or an Investor) including, without limitation, all structural or other changes to the Loan, modifications to any documents evidencing or securing the Loan, delivery of opinions of counsel acceptable to the Rating Agency or such Investors and addressing such matters as the Rating Agency or such Investors may require; provided, however, that the Borrower shall not be required to modify any documents evidencing or securing the Loan which would modify (i) the interest rate payable Oklahoma City, Oklahoma 44 under the Note, (ii) the stated maturity of the Note, (iii) the amortization of principal of the Note, or (iv) any other material terms or covenants of the Loan. (c) If Securities are issued in connection with the Loan or a Secondary Market Transaction occurs with respect to the Loan, all Funds held by Lender in escrow or pursuant to reserves in accordance with the Loan Documents shall be deposited in "eligible accounts" at "eligible institutions" and invested in "permitted investments" as then defined and required by any Rating Agency. 55. COUNTERPARTS. This Mortgage may be executed in several counterparts each of which when executed and delivered is an original, but all of which together shall constitute one instrument. 56. SPECIAL STATE OF OKLAHOMA PROVISIONS. The terms and provisions of this Section 56 control and supersede any other conflicting terms and provisions contained in this Mortgage. NOTICE A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE. (a) REMEDIES. If a default shall have occurred, Lender shall have the following rights and remedies, which shall be in addition to and not in limitation of any other rights and remedies set forth in this Mortgage: (1) POWER OF SALE. Lender may elect to use the non-judicial Power of Sale which is hereby conferred under the terms of this Mortgage. Such Power of Sale shall be exercised by giving Borrower Notice of Intent to Foreclose by Power of Sale and setting forth among other things, the nature of the breach(es) or default(s) and the action required to effect a cure thereof and the time period within which such cure may be effected all in compliance with Title 46 Oklahoma Statutes Sections 40 et seq., Oklahoma Power of Sale Mortgage Foreclosure Act (the "ACT"), as the same may be amended from time to time or other applicable statutory authority. If no cure is effected within the statutory time limits, the Lender may accelerate the Indebtedness without further notice (the Act's cure period shall run concurrently with any contractual provision for notice and/or cure period before acceleration of the Indebtedness) and may then proceed in the manner and subject to the conditions of the Act to send to Borrower and other necessary parties a Notice of Sale and to sell and convey the Real Oklahoma City, Oklahoma 45 Property in accordance with the Act. The sale shall be made at one or more sales, as an entirety or in parcels, upon such notice, at such time and places, subject to all conditions and with the proceeds thereof to be applied all as provided in the Act. No action of Lender based upon the provisions contained herein or contained in the Act, including, without limitation, the giving of the Notice of Intent to Foreclose by Power of Sale or the Notice of Sale, shall constitute an election of remedies which would preclude Lender from pursuing judicial foreclosure before or at any time after commencement of the power of sale foreclosure procedure. (2) JUDICIAL FORECLOSURE. Whether or not proceedings have commenced by the exercise of the Power of Sale above given, Lender in lieu of proceeding with the power of sale may at its option declare the whole amount of the secured indebtedness remaining unpaid, immediately due and payable without notice, and proceed by suit or suits in equity or at law to foreclose this Mortgage. The Real Property may be sold as one parcel or in such parcels as the Lender may elect unless otherwise provided by law. (3) APPOINTMENT OF RECEIVER. Without regard to Lender's election of non-judicial Power of Sale foreclosure or judicial foreclosure, Lender shall be entitled to the appointment of a receiver by any court of competent jurisdiction, without notice and without regard to the sufficiency or value of any security for the secured indebtedness or the solvency of any party bound for its payment. The receiver shall have all of the rights and powers permitted under the laws of the state within which the Real Property is located. (b) WAIVER OF APPRAISEMENT. Notwithstanding anything to the contrary contained in this Mortgage, if the Lender elects to foreclose this Mortgage by judicial proceedings, appraisement of the Real Property is waived or not waived at the option of the Lender and such option can be exercised at or prior to the time judgment is rendered in any judicial foreclosure hereof. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Oklahoma City, Oklahoma 46 IN WITNESS WHEREOF, Borrower has caused this Mortgage to be executed as of the day and year first above written. BORROWER: OKLAHOMA CITY STORE NO. 151 L.L.C., a Delaware limited liability company By: AGREE LIMITED PARTNERSHIP, a Delaware limited partnership Its Member By: AGREE REALTY CORPORATION, a Maryland corporation Its General Partner By: /s/ Richard Agree ---------------------- Richard Agree President STATE OF ) ) COUNTY OF ) This instrument was acknowledged before me on October _____, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a Maryland corporation, as general partner of Agree Limited Partnership, a Delaware partnership, as member of Oklahoma City Store No. 151 L.L.C., a Delaware limited liability company. ------------------------------------ Name: ------------------------------ Notary Public My Commission Expires: ------------- Commission No. --------------------- (SEAL) Oklahoma City, Oklahoma S-1 EXHIBIT A (Legal Description) SITUATED IN THE CITY OF OKLAHOMA, COUNTY OF OKLAHOMA, STATE OF OKLAHOMA: A part of Block Five (5), UNITED FOUNDERS LIFE PLAZA, in the East Half (E/2) of Section Twelve (12), Township Twelve (12) North, Range Four (4) West of the Indian Meridian, Oklahoma County, Oklahoma, more particularly described as follows, to-wit: COMMENCING at the Northeast Corner of said Block 5, UNITED FOUNDERS LIFE PLAZA in the East Half (E/2) of Section 12, Township 12 North, Range 4 West; Thence South 0(degree)07'26" West along the East line of said Block 5 a distance of 430.00 feet to the point of place of beginning; Thence North 89(degree)52'34" West a distance of 354.03 feet; Thence South 0(degree)07'26" West along a line 354.03 feet West of and parallel to the East line of said Block 5 a distance of 177.45 feet; Thence along a curve to the left having a radius of 150.00 feet a distance of 117.81 feet and whose chord has a bearing of South 22(degree)22'34" East and a length of 114.81 feet; Thence South 44(degree)52'34" East a distance of 52.86 feet; Thence along a curve to the right having a radius of 79.87 feet a distance of 101.77 feet to a point on the North Right-of-Way line of Northwest Highway, said curve has a chord bearing South 08(degree)22'27" East and a length of 95.03 feet; Thence South 61 (degree)52'20" East along said North Right-of-Way Line a distance of 230.65 feet; Thence continuing along Northwest Highway Right-of-Way South 28(degree)07'40" West a distance of 31.44 feet; Thence South 61 (degree)40'56" East a distance of 37.42 feet; Thence along a curve to the left having a radius of 25.00 feet a distance of 51.57 feet, said curve has a chord bearing of North 59(degree)13'15" East and a length of 42.90 feet; Thence North 0(degree)07'26" East along the East line of said Block 5 a distance of 546.58 feet to the point or place of beginning. TOGETHER WITH Reciprocal Easement Agreement ("REA") between Marriott Corporation and Northwest Investors, Ltd. as recorded in Book 5053, Page 610; Assignment in favor of Mutual Benefit Oklahoma City Marriott Associates Limited Partnership recorded in Book 5414, Page 12; Assignment of Reciprocal Easement Agreement in favor of HMH Properties, Inc., recorded in Book 6895, Page 1511; and First Amendment to Reciprocal Easement Agreement recorded in Book 6972, Page 946 across part of Block 5 United Founders Life Plaza a re-plat of "Capitol Gate Shopping Center" a part of the E % of Section 12, T12N, R4W of the I.M., Oklahoma City, Oklahoma County, Oklahoma more particularly described as follows: Oklahoma City, Oklahoma Exhibit A - Page 1 A 61'-4" reciprocal easement for roadway purposes lying 30'-8" on either side of the following described centerline: Commencing at the N.E. corner of said Block 5 United Founders Life Plaza; Thence S00(degree)07'26"W along the East line of said Block 5 a distance of 240.00 feet; Thence N89(degree)52'34"W a distance of 354.03 feet to the point or place of beginning; Thence S00(degree)07'26"W a distance of 367.45 feet; Thence along the arc of a curve to the left having a radius of 150.00 feet a distance of 117.81 feet and whose chord has a bearing of S22(degree)22'34"E and a length of 114.81 feet; Thence S44(degree)52'34"E a distance of 52.65 feet; Thence along the arc of a curve to the right having a radius of 80.00 feet a distance of 1 01.93 feet to a point on the North R/W line of Northwest Highway, said curve has chord bearing of S08(degree)22'27"E and a length of 95.18 feet. Oklahoma City, Oklahoma Exhibit A - Page 2 EX-10.36 6 k82459exv10w36.txt DEED OF TRUST AND SECURITY AGREEMENT Recorded at the Request of and EXHIBIT 10.36 When Recorded Return to: Pepe & Hazard LLP 225 Asylum Street - 22nd Floor Hartford, CT 06103-4302 Attention: Adam F. Zweifler, Esq. DEED OF TRUST AND SECURITY AGREEMENT This DEED OF TRUST AND SECURITY AGREEMENT (the "MORTGAGE") is dated as of the _____ day of October, 2003, by OMAHA STORE NO. 166 L.L.C., a Delaware limited liability company ("BORROWER"), having its principal office at 31850 Northwestern Highway, Farmington Hills, Michigan 48334 to and in favor of FIDELITY NATIONAL TITLE INSURANCE COMPANY, a California corporation, having an address at 1901 North Roselle Road, Suite 650, Schaumberg, Illinois 60195 (the "TRUSTEE"), as trustee for NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its successors and assigns ("LENDER"), having its principal office at One Nationwide Plaza, Columbus, Ohio 43215-2220, Attention: Real Estate Investment Department, 34T, or at such other place as Lender may from time to time designate. W I T N E S S E T H: WHEREAS, Lender has made four loans of even date herewith in the aggregate total original principal amount of Fifteen Million Dollars ($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the following loans of even date herewith: a loan from Lender to Borrower in the original principal amount of $3,910,000.00 (this "LOAN"); a loan to ACMP Germantown LLC, a Delaware limited liability company ("AGREE-MILESTONE"), in the original principal amount of $3,310,000.00 (the "AGREE-MILESTONE LOAN"); a loan to ACCP Maryland LLC, a Delaware limited liability company ("AGREE-COLUMBIA") in the original principal amount of $3,520,000.00 (the "AGREE-COLUMBIA LOAN"); and a loan to Oklahoma City Store No. 151 L.L.C., a Delaware limited liability company ("OKLAHOMA CITY"), in the original principal amount of $4,260,000.00 (the "OKLAHOMA CITY LOAN") Agree-Milestone, Agree-Columbia and Oklahoma City are hereinafter referred to collectively as the "AFFILIATED BORROWERS". The Agree-Milestone Loan, the Agree-Columbia Loan and the Oklahoma City Loan are hereinafter referred to generically as an "AFFILIATE LOAN" and collectively as the "AFFILIATE LOANS"; Omaha, Nebraska WHEREAS, Borrower is justly indebted to Lender in the original principal sum of Three Million Nine Hundred Ten Thousand and 00/100 Dollars ($3,910,000.00) with interest thereon, which Loan is evidenced and represented by that certain Note of even date herewith (the "NOTE"), both principal and interest being payable as therein provided, with the first payment on the Note becoming due and payable on the date of disbursement and the term "Note" shall include all other notes given in substitution, modification, increase, renewal or extension of the original Note described herein, in whole or in part; WHEREAS Borrower has guaranteed the payment and performance of the obligations of the Affiliated Borrowers with respect to the Affiliate Loans pursuant to the terms of that certain Cross-Default Guaranty Agreement of even date herewith from Borrower, as guarantor, to Lender (the "BORROWER CROSS-DEFAULT GUARANTY"); and WHEREAS, Lender, as a condition precedent to the extension of credit and the making of the Loan has required that Borrower provide Lender with security for the repayment of the Loan as well as for the performance, observance and discharge by Borrower of various terms, covenants, conditions and agreements made by Borrower to, with, in favor of and for the benefit of Lender with respect to the Loan and such security; NOW THEREFORE, in consideration of and in order to secure the repayment of the Loan evidenced and represented by the Note, together with interest on the Loan, as well as the payment of all other sums of money secured hereby, as hereinafter provided; to secure the observance, performance and discharge by Borrower of all terms, covenants, conditions and agreements set forth in the Note, this Mortgage and in the other Loan Documents (hereafter defined); in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of one dollar paid by Lender to Borrower, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged by Borrower, Borrower does hereby grant, bargain, sell, convey, assign, transfer, pledge, deliver, hypothecate, warrant and confirm unto Trustee, in trust, with POWER OF SALE for the benefit of Lender forever, all of Borrower's right, title and interest in and to the following described properties, including all rights, interests, replacements, substitutions and additions thereto, therein or therefore (collectively, the "MORTGAGED PROPERTY"): (i) All that certain piece, parcel or tract of land or real property of which Borrower is now seized and in actual or constructive possession, situated in the City of Omaha, County of Douglas, and State of Nebraska (the "STATE"), and being more particularly described on EXHIBIT A attached hereto and by this reference made a part hereof (the "REAL PROPERTY"); (ii) All buildings, structures and other improvements of any kind, nature or description now or hereafter erected, constructed, placed or located upon the Real Property Omaha, Nebraska 2 (the "IMPROVEMENTS"), including, without limitation, any and all additions to, substitutions for or replacements of such Improvements; (iii) All minerals, royalties, gas rights, water, water rights, water stock, flowers, shrubs, lawn plants, crops, trees, timber and other emblements now or hereafter located on, under or above all or any part of the Real Property; (iv) All and singular, the tenements, hereditaments, strips and gores, rights-of-way, easements, privileges, profits and other appurtenances now or hereafter belonging or in any way appertaining to the Real Property, including, without limitation, all right, title and interest of the Borrower in any after-acquired right, title, interest, remainder or reversion in and to the beds of any ways, streets, avenues, roads, alleys, passages and public places, open or proposed, in front of, running through, adjoining or adjacent to the Real Property (the "APPURTENANCES"); (v) Any and all leases, licenses, contracts, rents, license fees, royalties, issues, revenues, profits, proceeds, deposits, income and other benefits, including accounts receivable, termination fees, of, accruing to or derived from the Real Property, Improvements and Appurtenances, and any business or enterprise presently situated or hereafter operated thereon and therewith and all of Borrower's right, title and interest under any and all lease guaranties, letters of credit, and any other credit support furnished to Borrower in connection with any of the foregoing (the "RENTS"); (vi) Any and all awards, payments or settlements, including interest thereon, and the right to receive the same, as a result of: (a) the exercise of the right of eminent domain; (b) the alteration of the grade of any way, street, avenue, road, alley, passage or public place; (c) any other injury, damage, casualty or claim relating to the taking of, or decrease in the value of, the Real Property, Improvements or Appurtenances; or (d) proceeds of insurance awards, to the extent of all amounts which may be secured by this Mortgage at the date of any such award or payment including but not limited to Reasonable Attorneys' Fees (as hereinafter defined), costs and disbursements incurred by Lender in connection with the collection of such award or payment; (vii) All fixtures, materials, equipment, machinery, apparatus, appliances, and other property whatsoever now or hereafter attached to, installed in, or used in connection with the buildings and other improvements now erected or hereafter to be erected on said land, including, but not limited to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators, air-conditioning and sprinkler systems, gas and electric fixtures, carpets, rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all other furnishings, tools, equipment and machinery, appliances, building supplies, materials, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing, all of which property and things are hereby declared to be permanent Omaha, Nebraska 3 fixtures and accessions to the freehold and part of the realty conveyed herein as security for the indebtedness herein mentioned; and (viii) All agreements or contracts relating to any interest rate cap agreements, swaps or other interest hedging agreements; TO HAVE AND TO HOLD the foregoing Mortgaged Property and the rights hereby granted for its use and benefit unto Lender, Trustee and its successors and assigns in fee simple forever, successors in interest of Trustee, in trust, in fee simple forever. In order to secure the repayment of the Loan evidenced and represented by the Note, together with interest on the Loan, as well as the payment of all other sums of money secured hereby including, without limitation, the obligations of Borrower under the Borrower Cross-Default Guaranty, as hereinafter provided; and to secure the observance, performance and discharge by Borrower of all covenants, conditions and agreements set forth in the Note, this Mortgage, the Borrower Cross-Default Guaranty and in the other Loan Documents; and in order to charge the properties, interests and rights hereinafter described with such payment, observance, performance and discharge; and in consideration of the sum of Ten Dollars ($10.00) paid by Lender and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Borrower hereby grants to Trustee with POWER OF SALE, for the benefit of Lender, as beneficiary, all of Borrower's right, title and interest in and to a security interest in all Fixtures, Goods (including, without limitation, Consumer Goods, Inventory, Equipment and Farm Products), Accounts, Chattel Paper (including, without limitation, Electronic Chattel Paper and Tangible Chattel Paper), Instruments, General Intangibles (including, without limitation, Payment Intangibles and Software), Letters of Credit, Letter-of-Credit Rights, Documents, As-Extracted Collateral, Money and Deposit Accounts of every kind, and all proceeds thereof, including, without limitation, any and all licenses, permits, franchises, trademarks, trade names, service marks or logos, plans, specifications, maps, construction contracts, instruments, insurance policies, fittings and fixtures of every kind, which is, are or shall hereafter be located upon, attached, affixed to or used or useful, either directly or indirectly, in connection with the complete and comfortable use, occupancy and operation of the Real Property, Improvements or Appurtenances as a retail project (the "EXISTING USE"), or any other business, enterprise or operation as may hereafter be conducted upon or with said Real Property, Improvements or Appurtenances, including, without limitation, any and all licenses, permits or franchises, used or required in connection with such use, occupancy or operation as well as the proceeds thereof or therefrom regardless of form, all security deposits and advance rentals under lease agreements now or at any time hereafter covering or affecting any of the Property and held by or for the benefit of Borrower, all monetary deposits which Borrower has been required to give to any public or private utility with respect to utility services furnished to the Real Property or Improvements, all rents, issues and profits from leases of all or any part of the Real Property or Improvements, all proceeds (including premium refunds) of each policy of insurance relating to the Real Property or Improvements, all proceeds from the taking of the Real Property or Improvements or any part Omaha, Nebraska 4 thereof or any interest therein or right or estate appurtenant thereto by eminent domain or by purchase in lieu thereof, all amounts deposited in escrow for the payment of ad valorem taxes, assessments, charges, ground rentals and/or premiums for policies of insurance with respect to the Real Property or Improvements, all proceeds and other amounts paid or owing to Borrower under or pursuant to any and all contracts and bonds relating to the construction, erection or renovation of the Real Property or Improvements, all oil, gas and other hydrocarbons and other minerals produced from or allocated to the Real Property and all products processed or obtained therefrom, the proceeds thereof, and all accounts and general intangibles under which such proceeds may arise, together with any sums of money that may now or at any time hereafter become due and payable to Borrower by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of any kind or character arising under any and all present and future oil, gas and mining leases covering the Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL PROPERTY," which term expressly excludes any toxic waste or substance deemed hazardous under federal, regional, state or local laws, codes, ordinances, statutes, rules, regulations, decisions or orders). The Mortgaged Property and the Fixtures and Personal Property are herein together referred to as the "PROPERTY". Except as otherwise expressly provided in this Mortgage, all terms in this Mortgage relating to the Property and the grant of the foregoing security interest which are defined in the Uniform Commercial Code of the State (the "UCC") shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the UCC, as those meanings may be amended, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the UCC have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the UCC shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the UCC in effect on the date of this Mortgage, then such term, as used herein, shall be given such broadened meaning. If the UCC shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the UCC in effect on the date of this Mortgage, such amendment or holding shall be disregarded in defining terms used in this Mortgage. Borrower hereby covenants and warrants with and to Lender that Borrower is indefeasibly seized of the Property and has good right, full power, and lawful authority to convey and encumber all of the same as aforesaid; that Borrower hereby fully warrants the title to the Property and will defend the same and the validity and priority of the lien and encumbrance of this Mortgage against the lawful claims of all persons whomsoever; and Borrower further warrants that the Property is free and clear of all liens and encumbrances of any kind, nature or description, save and except only (with respect to said Real Property, Improvements and Appurtenances) for real property taxes for years subsequent to 2003 (which are not yet due and payable) and those exceptions accepted by Lender as set forth in the title insurance commitment or proforma policy issued to Lender precedent to the issuance of a Omaha, Nebraska 5 Lender's Policy of Title Insurance insuring the first lien priority of this Mortgage (the "PERMITTED EXCEPTIONS"). If Borrower shall pay to Lender the Loan evidenced by the Note, and if Borrower shall duly, promptly and fully perform, discharge, execute, effect, complete and comply with and abide by each and every one of the terms, covenants, conditions and agreements of the Note, this Mortgage, the Borrower Cross-Default Guaranty and all other Loan Documents, then this Mortgage and the estates and interests hereby granted and created shall cease, terminate and be null and void, and shall be discharged of record at the expense of Borrower. Borrower, for the benefit of Lender and its successors and assigns, does hereby expressly covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall pay the principal of the Loan evidenced by the Note, together with all interest thereon, in accordance with the terms, covenants and conditions of the Note, and perform all obligations of Borrower under the Borrower Cross-Default Guaranty promptly at the times, at the place and in the manner that said principal and interest shall become due, and shall promptly and punctually pay all other sums required to be paid by Borrower pursuant to the terms, covenants and conditions of the Note, this Mortgage, the Borrower Cross-Default Guaranty, the Assignment of Leases, Rents and Profits of even date herewith (the "ASSIGNMENT") and all other documents and instruments executed as further evidence of, as additional security for or executed in connection with the Loan evidenced by the Note (collectively, the "LOAN DOCUMENTS"). 2. PERFORMANCE OF OTHER OBLIGATIONS. Borrower shall perform, comply with and abide by each and every one of the terms, covenants, conditions and agreements contained and set forth in the Note, this Mortgage, and the other Loan Documents, shall comply with all Laws, (hereafter defined) and shall perform all of its obligations under any term, covenant, condition, restriction or agreement of record affecting the Property, and to insure that at all times the Property constitutes one or more legal lots capable of being conveyed without violation of any subdivision or platting laws, codes, ordinances, statutes, rules, regulations, or other laws relating to the division, separation or subdivision of real property. 3. PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY; HAZARDOUS WASTE. (a) Borrower shall keep all Improvements now existing or hereafter erected on the Real Property in good order and repair, only to be used for the Existing Use, and not to do or permit any waste, impairment or deterioration thereof or thereon, nor to alter, remove or demolish any of the Improvements or any Fixtures and Personal Property attached or appertaining thereto, without the prior written consent of Lender, nor to initiate, join in or Omaha, Nebraska 6 consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the uses which may be made of the Property or any part thereof, nor to do or permit any other act whereby the Property shall become less valuable, be used for purposes contrary to applicable Law or be used in any manner which will increase the premium for or result in a termination or cancellation of the insurance policies hereinafter required to be kept and maintained on the Property. In furtherance of, and not by way of limitation upon, the foregoing covenant, Borrower shall effect such repairs as Lender may reasonably require, and from time to time make all needful and proper replacements so that the Improvements, Appurtenances, Fixtures and Personal Property will, at all times, be in good condition, fit and proper for the respective purposes for which they were originally erected or installed. In connection with the making of such repairs, Borrower shall use contractors who are properly licensed, who carry workers' compensation insurance and appropriate liability insurance, who generally have a good reputation for completing their work in a neat, prompt and workmanlike manner, and use only new or re-manufactured goods of a quality as good or better than that originally used on the Property. As provided herein, Borrower shall insure that no liens are filed against the Property that relate in any way to the repair work provided for herein. For so long as that certain Lease of the Property (the "BORDERS LEASE") dated November 14, 2002 between Borrower, as landlord, and Border's, Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with Borders as the tenant thereunder and Borrower is diligently enforcing the obligations of Borders thereunder, Borrower shall be deemed to be in compliance with the requirements of this subparagraph. Borrower at all times shall keep the Property and ground water of the Property free of Hazardous Materials (as hereinafter defined) to the extent required by applicable governmental agencies and free of any liens arising in connection therewith. Borrower shall not and shall not knowingly permit its tenants or any third party requiring the consent of Borrower to enter the Property, to use, generate, manufacture, treat, store, release, threaten release, transport on or over, emit or dispose of Hazardous Materials in, on, over, under or about the Property including the ground water of the Property in violation of any federal, regional, state or local law, code, ordinance, statute, rule, regulation, decision or order currently in existence or hereafter enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Borrower shall give Lender prompt Written Notice (as hereinafter defined) of any claim by any person, entity, or governmental agency that a significant release or disposal of Hazardous Materials has occurred in, on, over, under or about the Property, including the ground water of the Property, in excess of those permitted by the Hazardous Waste Laws, whether caused by the Borrower, any tenant or any third party. Borrower, through its professional engineers and at Borrower's sole cost, shall promptly and thoroughly investigate any suspected release of Hazardous Materials in, on, over, under or about the Property, including the ground water of the Property. Borrower shall forthwith remove, repair, remediate, clean up, and/or detoxify any Hazardous Materials found in, on, over, under or about the Property or in the ground water of the Property to the extent such actions are required by any applicable Hazardous Waste Laws, and whether or not Borrower was responsible for the existence of the Hazardous Materials in, on, Omaha, Nebraska 7 over, under or about the Property or the ground water of the Property. "HAZARDOUS MATERIALS" shall include, but not be limited to, substances defined as "hazardous substances," "hazardous materials," or "toxic substances" under any Hazardous Waste Laws. (b) In addition, Borrower shall not incorporate any underground storage tanks into the Real Property without the prior written consent of Lender, and shall insure that all tanks currently on the Real Property comply with current Hazardous Waste Laws and underground storage tank regulations and are properly registered. Borrower hereby agrees to indemnify and defend Lender and hold Lender harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses, fines, fees, suits, actions, debts, obligations, and claims of any and every kind whatsoever, including Reasonable Attorneys' Fees (collectively, "LOSSES") paid, incurred or suffered by, or asserted against, Lender for, with respect to, or as a direct or indirect result of, the presence in, on, over, under or about, or the escape, seepage, leakage, spillage, discharge, emission or release from, the Property of any Hazardous Materials (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Hazardous Waste Laws), regardless of the source of origination and whether or not caused by, or within the control of, Borrower and including any claims of lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(b) and similar provisions in this Mortgage and the other Loan Documents concerning Hazardous Materials shall survive repayment of the Note and satisfaction of this Mortgage; provided, however, Borrower shall have no liability under this Section 3(b) regarding Hazardous Materials if either (i) the Property becomes contaminated subsequent to Lender's acquisition of the Property by foreclosure, acceptance by Lender of a deed in lieu thereof, or subsequent to any transfer of ownership of the Property which was approved or authorized by Lender in writing, pursuant to this Mortgage, provided that such transferee assumes in writing all of the obligations of Borrower with respect to Hazardous Materials pursuant to the Loan Documents, or (ii) at such time Borrower provides Lender with an environmental assessment report acceptable to Lender, in Lender's sole discretion, showing the Property to be free of Hazardous Materials and not in violation of any Hazardous Waste Laws. The burden of proof under this Section 3(b) with regard to establishing the date upon which any Hazardous Materials was released in, on, over, under or about the Property shall be upon Borrower. (c) Borrower at all times shall maintain the Property in full compliance with all federal, state, county, regional or local laws, codes, ordinances, rules, regulations, decisions and orders currently in existence or hereafter enacted or rendered, governing accessibility for the disabled, including but not limited to: The Architectural Barriers Act of 1968; The Rehabilitation Act of 1973; The Fair Housing Act of 1988 and the Americans with Disabilities Act (collectively, the "ACCESSIBILITY LAWS"). Omaha, Nebraska 8 Borrower hereby agrees to indemnify and defend Lender and hold Lender harmless from and against any and all Losses paid, incurred or suffered by, or asserted against Lender for, with respect to, or as a direct or indirect result of, the non-compliance of the Property with the Accessibility Laws whether or not caused by, or within the control of, Borrower, and including any claims of lender's negligence or strict liability, but excluding Lender's willful misconduct or gross negligence. Liability under this Section 3(c) and similar provisions in this Mortgage and the other Loan Documents concerning Accessibility Laws shall survive repayment of the Note and satisfaction of this Mortgage; provided, however, Borrower shall not be liable under this Section 3(c) for compliance with any Accessibility Laws if such Accessibility Laws first become effective, or such violations result from alterations or improvements to the Property that are performed subsequent to Lender's acquisition of the Property by foreclosure or acceptance of a deed in lieu thereof or subsequent to any transfer which was approved or authorized by Lender pursuant to this Mortgage, provided that such transferee assumes in writing all obligations pertaining to the Accessibility Laws pursuant to this Mortgage and the other Loan Documents. The burden of proof under this Section 3(c) with regard to establishing the date upon which such non-compliance with any Accessibility Laws occurred at the Property shall be upon Borrower. (d) Lender, and/or its agents, shall have the right and shall be permitted, subject to the rights of Borders under the Borders Lease, but shall not be required, at all reasonable times, to enter upon and inspect the Property to insure compliance with the foregoing covenants, and any and all other terms, covenants, conditions and agreements set forth in this Mortgage. 4. PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Borrower shall pay, or cause to be paid, all taxes, assessments and other charges as already levied or assessed, or that may be hereafter levied or assessed, upon or against the Property, when the same shall become due and payable according to Law, before delinquency, and before any interest or penalty shall attach thereto, and to deliver official receipts evidencing the payment of the same to Lender not later than thirty (30) days following the payment of the same. Borrower shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, the proposed assessment of ad valorem taxes or special assessments by governmental authorities having jurisdiction over the Property; provided, however, Borrower shall give Written Notice of its intent to bring such an action to Lender, and Lender may, in its sole discretion, require Borrower to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Mortgage) as a result of Borrower's act. Omaha, Nebraska 9 5. PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Borrower shall immediately pay and discharge from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, realtors, brokers and others which, if unpaid, might result in, or permit the creation of, a lien, charge or encumbrance upon the Property or any part thereof, or on the Rents, arising therefrom and, in general, to do or cause to be done everything necessary so that the lien of this Mortgage shall be fully preserved, at the sole cost of Borrower, without expense to Lender. Borrower shall have the right to contest, in good faith and in accordance with applicable Laws and procedures, mechanics', materialmens' and other such liens filed against the Property; provided however, that Borrower shall give Written Notice to Lender of its intent to bring such action, and Lender may, in Lender's sole discretion, require Borrower to post a bond or other collateral satisfactory to Lender (and acceptable to the title company insuring this Mortgage) as a result of Borrower's act. 6. PAYMENT OF JUNIOR ENCUMBRANCES. Borrower shall permit no default or delinquency under any other lien, imposition, charge or encumbrance against the Property, even though junior and inferior to the lien of this Mortgage; provided however, the foregoing shall not be construed to permit any such additional lien or encumbrance against the Property, other than the Permitted Exceptions. 7. PAYMENT OF MORTGAGE TAXES. Borrower shall pay any and all taxes which may be levied or assessed directly or indirectly upon the Note and/or this Mortgage (except for income taxes payable by Lender) or the Loan, without regard to any Law which may be hereafter enacted imposing payment of the whole or any part thereof upon Lender, its successors or assigns. Upon violation of this covenant, or upon the rendering by any court of competent jurisdiction of a decision that such a covenant by Borrower is legally inoperative, or if any court of competent jurisdiction shall render a decision that the rate of said tax when added to the rate of interest provided for in the Note exceeds the then maximum rate of interest allowed by Law, then, and in any such event, the debt hereby secured shall, at the option of Lender, its successors or assigns, become immediately due and payable, anything contained in this Mortgage or in the Note notwithstanding, without the imposition of a Prepayment Premium (as defined in the Note). The additional amounts which may become due and payable hereunder shall become a part of the Loan secured by this Mortgage. 8. HAZARD INSURANCE. Borrower shall continuously, during the term of this Mortgage, keep the Improvements, Appurtenances, and Fixtures and Personal Property, now or hereafter existing, erected, installed and located in or upon the Real Property, insured with extended coverage insurance against loss or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine subsidence, acts of terrorism, and such other hazards, casualties, contingencies and perils including, without limitation, other risks insured against by persons operating like properties in the locality of the Property, or otherwise deemed necessary or advisable by Lender or any Rating Agency (as hereinafter defined), on such forms and with Omaha, Nebraska 10 such deductibles as may be required by Lender or any Rating Agency, covering the Property in the amount of the full replacement cost thereof, (without taking into account any depreciation) less excavating and foundation costs, and covering all loss or abatement of rental or other income, without a provision for co-insurance, in an amount equal to the scheduled rental income of the Property for at least twelve (12) months, or if applicable, business interruption insurance in an amount sufficient to pay debt service on the Note, operating expenses, taxes and insurance on the Property for a period of twelve (12) months, and covering loss by flood (if the Property lies in a Special Flood Hazard Area as designated on the Department of Housing and Urban Development's Maps, or other flood prone designation) in an amount equal to the outstanding principal balance of the Loan or such other amount as approved by Lender, and earthquake insurance with a deductible amount of no more than ten percent (10%) of the policy amount if, in the judgment of Lender's inspecting architect, the Property lies in an area of anticipated significant seismic activity, and "Ordinance or Law Coverage" or "Enforcement" endorsements in amounts satisfactory to Lender if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses or the ability to rebuild the Improvements is restricted or prohibited, and comprehensive boiler and machinery insurance (without exclusion for explosion), if applicable, in amounts as shall be reasonably required by Lender or any Rating Agency and covering all boilers or other pressure vessels, machinery and equipment located at or about the Property (including, without limitation, electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping). All such insurance shall be carried with a company or companies licensed to do business in the State, which is acceptable to Lender, which company or companies shall have a rating at the time this Mortgage is executed equivalent to at least A:X as shown in the most recent Best's Key Rating Guide. The original policy or policies and renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Each such policy of insurance shall contain a noncontributing loss payable clause in favor of and in a form acceptable to Lender, and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, non-renew, cancel or terminate the policy or policies, or the expiration of such policies of insurance, or the exclusion of any individual risk such as acts of terrorism. If the insurance required under this Section 8 or any portion thereof is maintained pursuant to a blanket policy, Borrower shall furnish to Lender a certified copy of such policy, together with an original Evidence of Insurance Certificate (Acord Form 27) for hazard insurance indicating that Lender is an additional insured under such policy in regard to the Property and showing the amount of coverage apportioned to the Property, which coverage shall be in an amount sufficient to satisfy the requirements hereof. Not less than fifteen (15) days prior to the expiration dates of each policy required of Borrower hereunder, Borrower will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Borrower, in and to any insurance policies then in force including any Omaha, Nebraska 11 rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. For so long as the Borders Lease remains in effect with Borders as the tenant thereunder, then to the extent that Borders self-insures to satisfy its insurance obligations under the Borders Lease, Lender shall accept such self-insurance as satisfying the obligation of Borrower to provide insurance under this Section 8, provided that (i) Borders, or the guarantor of the Borders Lease, Boarders Group, Inc., maintains a minimum net worth of not less than Two Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance otherwise satisfies the requirements of this Section 8 as to the amount required to be maintained by Borders, and (iii) Borrower provides to Lender written verification of such coverage in form and substance reasonably acceptable to Lender. Notwithstanding the foregoing, Lender shall have the right require Borrower to maintain in effect a separate policy of liability insurance with respect to the Property meeting the requirements of Section 9 of this Mortgage. In the event of loss covered by insurance maintained by Borrower with respect to the Property, including, without limitation, insurance covering hazards, casualties, contingencies and perils for which insurance has been required by Lender hereunder, Borrower shall give immediate notice thereof to Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an interest for Lender to, at its option, make proof of loss and/or to file a claim thereunder. Each insurance company concerned is hereby notified, authorized and directed to make payment for such loss directly to Lender, instead of to Borrower and Lender jointly, and Borrower hereby authorizes Lender to adjust and compromise any losses for which insurance proceeds are payable under any of the aforesaid insurance policies and, after deducting the costs of collection, to apply the proceeds of such insurance, at its option either: (a) to the restoration or repair of the insured Improvements, Appurtenances, and Fixtures and Personal Property, provided that, in the opinion and sole discretion of Lender, such restoration or repair is reasonably practical and, provided further, that, in the opinion and sole discretion of Lender, either: (i) the insurance proceeds so collected are sufficient to cover the cost of such restoration or repair of the damage or destruction with respect to which such proceeds were paid, or (ii) the insurance proceeds so collected are not sufficient alone to cover the cost of such restoration or repair, but are sufficient therefor when taken together with funds provided and made available by Borrower from other sources; in which event Lender shall make such insurance proceeds available to Borrower for the purpose of effecting such restoration or repair; but Lender shall not be obligated to see to the proper application of such insurance proceeds nor shall the amount of funds so released or used be deemed to be payment of or on account of the Loan; or (b) to the reduction of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured, in which event such proceeds shall be applied at par against the Loan and the monthly payment due on account of such Loan shall be reduced accordingly as calculated by Lender. None of such actions taken by Lender shall be deemed to be or result in a waiver or impairment of any equity, lien or right of Lender under and by virtue of this Mortgage, nor Omaha, Nebraska 12 will the application of such insurance proceeds to the reduction of the Loan serve to cure any default in the payment thereof. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Borrower in and to any insurance policies then in force including any rights to unearned premiums and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Borrower's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Borrower's sole expense. Notwithstanding anything set forth in this Section 8 to the contrary, in the event of loss or damage to the Property by fire or other casualty covered by insurance maintained by Borrower with respect to the Property, including, without limitation, insurance which has been required by Lender hereunder and provided by Borrower, and the amount of such loss or damage does not exceed twenty-five percent (25%) of the unpaid principal balance of the Note, Lender hereby agrees to allow the proceeds of insurance to be used for the restoration of the Property and to release such insurance proceeds to Borrower as such restoration progresses, provided: (a) Borrower is not in default under any of the terms, covenants and conditions of this Mortgage, the Note or any of the other Loan Documents; (b) The Improvements, after such restoration, shall be at least eighty percent (80%) leased pursuant to leases approved in writing by Lender; (c) The plans and specifications for the restoration of the Property are approved in writing by Lender in advance; (d) At all times during such restoration, Borrower has deposited with Lender funds which, when added to the insurance proceeds received by Lender, are sufficient to complete the restoration of the Property in accordance with the approved plans and specifications, and all applicable building codes, zoning ordinances, regulations and Accessibility Laws, and further, that the funds retained by Lender are sufficient to complete the restoration of the Property as certified to Lender by Lender's inspecting architect/engineer; (e) Borrower provides suitable completion, payment and performance bonds, builders' all risk insurance, and all necessary licenses and permits for such restoration in form and amount acceptable to Lender; (f) The insurer under such policies of fire or other casualty insurance does not assert any defense to payment under such policies against Lender, Borrower, any tenant, or third party of Borrower with regard to the Property; Omaha, Nebraska 13 (g) Lender shall have the option, upon the completion of such restoration of the Property, to apply any surplus insurance proceeds remaining after the completion of such restoration, at par, to the reduction of the outstanding principal balance of the Note; notwithstanding the fact that the amount owing thereon may not then be due and payable or that said Loan is otherwise adequately secured; (h) The funds held by Lender shall be disbursed no more often than once per month and in not more than five (5) increments of not less than Fifty Thousand Dollars ($50,000) each, except the final disbursement of such funds which may be in an amount less than Fifty Thousand Dollars ($50,000); (i) Lender's obligation to make any such disbursement shall be conditioned upon Lender's receipt of written certification from Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender by Borrower) that all construction and work for which such disbursement is requested has been completed in accordance with the approved plans and specifications and in accordance with all applicable building codes, zoning ordinances and all other Laws and, further, that Borrower has deposited with Lender sufficient funds to complete such restoration in accordance with Section 8(d); (j) In the reasonable judgment of the Lender, the Property can be restored within six months after insurance proceeds are made available and at least six months prior to the Maturity Date (as defined in the Note) to an economic unit not less valuable (including an assessment by Lender of the impact of the termination of any Occupancy Leases due to such casualty) and not less useful than the same was prior to the casualty, and after such restoration will adequately secure the outstanding balance of the Loan; and (k) Lender shall be entitled to require and to impose such other conditions to the release of such funds as would be customarily or reasonably be required and imposed by institutional mortgage lenders for a project of similar nature and cost. In the event of a casualty, provided that Borrower is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 8 to the contrary, Lender shall make insurance proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. 9. LIABILITY INSURANCE. Borrower shall carry and maintain such commercial general liability insurance as may from time to time be required by Lender or any Rating Agency, taking into consideration the type of property being insured and the corresponding liability exposure, on forms, with deductibles, in amounts and with such company or companies licensed to do business in the State and as may be acceptable to Lender. All such commercial general liability insurance shall be carried with a company or companies which have and maintain a rating equivalent to at least A:X as shown in the most recent Best's Omaha, Nebraska 14 Key Rating Guide. The original policy or policies and all renewals thereof (or, at the sole option of Lender, duplicate originals or certified copies thereof), together with a Certificate of Insurance (Acord Form 25S) and receipts evidencing payment of the premium therefor, shall be deposited with, held by and are hereby assigned to, Lender as additional security for the Loan. Such policy or policies of insurance shall name Lender as an additional insured and shall provide for not less than thirty (30) days prior Written Notice to Lender of any intent to modify, cancel, non-renew, or terminate the policy or policies or the expiration of such policy or policies of insurance, or the exclusion of any individual risk such as acts of terrorism. Not less than fifteen (15) days prior to the expiration dates of each policy or policies required of Borrower hereunder, Borrower will deliver to Lender a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment and renewal satisfactory to Lender. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Loan, all right, title and interest of Borrower, in and to any insurance policies then in force including any rights to unearned premiums, and in and to insurance proceeds then payable, shall pass to the purchaser or grantee. In case of Borrower's failure to keep the Property properly insured as required herein, Lender, its successors or assigns, may, at its option (but shall not be required to) acquire such insurance as required herein at Borrower's sole expense. 10. COMPLIANCE WITH LAWS. (a) Borrower shall observe, abide by and comply with all federal, regional, state and local laws, codes, ordinances, statutes, rules, regulations, decisions, orders, requirements or decrees relating to the Property enacted, promulgated or issued by any federal, state, county or local governmental or quasi-governmental authority or any agency or subdivision thereof having jurisdiction over Borrower or the Property, which now or hereafter affect Borrower or the Property, including Hazardous Waste Laws and Accessibility Laws (collectively, the "LAWS"), and to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning, variances, special exceptions and nonconforming uses), privileges, franchises and concessions which are applicable to the Property, or which have been granted to or contracted for by Borrower in connection with any existing, presently contemplated or future uses of the Property. (b) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Mortgage and the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Borrower shall deliver to Lender such certifications or other evidence from time to time throughout the term of this Mortgage, as requested by Lender in its sole discretion, that (i) Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of Omaha, Nebraska 15 ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true: (1) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. 11. MAINTENANCE OF PERMITS. Borrower shall obtain, keep and constantly maintain in full force and effect during the entire term of this Mortgage, all certificates, licenses and permits necessary to keep the Property operating for the Existing Use and, except as specifically provided for in this Mortgage, not to assign, transfer or in any manner change such certificates, licenses or permits without first receiving the written consent of Lender. 12. OBLIGATIONS OF BORROWER AS LESSOR. (a) Borrower shall perform every obligation of Borrower (as the landlord) and enforce every obligation of the tenant in any and every lease, license or other occupancy agreement of or affecting the Property or any part thereof (the "OCCUPANCY LEASES"), and not to modify, alter, waive or cancel any such Occupancy Leases or any part thereof or rights thereunder, without the prior written consent of Lender (but such consent shall not be required for such action as to Occupancy Leases of three thousand (3,000) square feet or less if such action is in the ordinary course of business of owning and operating the Property in a prudent and business-like manner, on then current market terms), nor collect for more than thirty (30) days in advance of the date due any Rents that may be collectible under any such Occupancy Leases and, except as provided for in this Mortgage, not to assign any such Occupancy Lease(s) or any such Rents relating thereto, to any party other than Lender, without the prior written consent of Lender. Borrower will notify Lender in writing of any default under any Occupancy Lease. In the event of default under any such Occupancy Lease by reason of failure of Borrower to keep or perform one or more of the covenants, agreements or conditions thereof, Lender is hereby authorized and empowered, and may, at its sole option, remedy, remove or cure any such default, and further, Lender may, at its sole option and in its sole discretion but without obligation to do so, pay any sum of money deemed necessary by Lender for the performance of said covenants, agreements and conditions, or for the curing or removal Omaha, Nebraska 16 of any such default, and incur all expenses and obligations which Lender may consider necessary or reasonable in connection therewith, and Borrower shall repay on demand all such sums so paid or advanced by Lender together with interest thereon until paid at the lesser of either: (i) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (ii) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; all of such sums, if unpaid, shall be added to and become part of the Loan. (b) All such Occupancy Leases hereafter made shall be subject to the approval of Lender and: (i) shall be at competitive market rental rates then prevailing in the geographic area for projects used for the Existing Use comparable to the Property; (ii) shall have lease terms of not less than three years; and (iii) at Lender's option, shall be superior or subordinate in all respects to the lien of this Mortgage. Provided, however, that Lender shall not require approval in advance of any Occupancy Leases which conform to the Borrower's Form Lease (as hereinafter defined) as previously approved by Lender, except as set forth below. Neither the right nor the exercise of the right herein granted unto Lender to keep or perform any such covenants, agreements or conditions as aforesaid shall preclude Lender from exercising its option to cause the whole Loan to become immediately due and payable by reason of Borrower's default in keeping or performing any such covenants, agreements or conditions. (c) Lender has approved a form of Occupancy Lease to be used by Borrower in connection with the Property (the "FORM LEASE"). Borrower shall not, without the prior written consent of Lender, modify or alter the Form Lease in any material respect. In addition, Borrower shall not, without the prior written consent of Lender, surrender, terminate, modify or alter, either orally or in writing, any Occupancy Lease now existing or hereafter made with any Major Tenant (as hereinafter defined) for all or part of the Property, permit an assignment or sublease of any such Occupancy Lease, or request or consent to the subordination of any Occupancy Lease to any lien subordinate to this Mortgage. Borrower shall furnish Lender with copies of all executed Occupancy Leases of all or any part of the Property now existing or hereafter made, and Borrower shall assign to Lender (which assignment shall be in form and content acceptable to Lender), as additional security for the Note and the Loan, all Occupancy Leases now existing or hereafter made for all or any part of the Property. (d) Notwithstanding the foregoing approval by Lender of Borrower's Form Lease, Lender hereby specifically reserves the right to approve all prospective tenants under all Occupancy Leases hereafter proposed to be made if either: (i) the term thereof, excluding options to renew the same, exceeds five years; or (ii) the net rentable area to be occupied thereunder, including expansion options, exceeds ten percent (10%) of the net leasable area of each of the buildings comprising the Improvements (the tenants under such leases being hereinafter referred to as "MAJOR TENANTS"). Borrower shall notify Lender in writing of all Omaha, Nebraska 17 prospective Major Tenants, and shall deliver to Lender, at Borrower's sole cost and expense, a copy of the prospective Major Tenant's current financial statement and the most recent Dun & Bradstreet credit report on said prospective Major Tenant. The financial statement delivered to Lender hereunder shall be certified as true and correct by the Major Tenant, or, if available, by a certified public accountant. (e) In no event shall Borrower exercise any right to relocate any tenant outside the Property pursuant to any right set forth in an Occupancy Lease without the prior written consent of Lender. 13. MAINTENANCE OF PARKING & ACCESS PROHIBITION AGAINST ALTERATION; SEPARATE TAX LOT. (a) Borrower shall construct, keep and constantly maintain, as the case may be, all curbs, drives, parking areas and the number of parking spaces heretofore approved by Lender, or heretofore or hereafter required by any Laws or any governmental body, agency or authority having jurisdiction over Borrower or the Property, and as required by the terms of the Occupancy Leases, and not to alter, erect, build or construct upon any portion of the Property, any building, structure or improvement of any kind whatsoever, the erection, building or construction of which has not been previously approved by Lender in writing, which approval shall be at the sole discretion of Lender. (b) Borrower shall cause the Property to remain separately assessed for real estate tax purposes as a separate tax lot or lots. 14. EXECUTION OF ADDITIONAL DOCUMENTS. Borrower shall do, make, execute, acknowledge, witness and deliver all deeds, conveyances, mortgages, deeds of trust, assignments, estoppel certificates, subordination non-disturbance and attornments, notices of assignments, transfers, assurances, security agreements, financing statements and renewals thereof, and all other instruments or other acts necessary, as Lender shall from time to time require for the purpose of better assuring, conveying, assigning, transferring, securing and confirming unto Lender the Property and rights hereby encumbered, created, conveyed, assigned or intended now or hereafter so to be encumbered, created, conveyed or assigned, or which Borrower may now be or may hereafter become bound to encumber, create, convey or assign to Lender, or for the purpose of carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage, and to pay all filing, registration or recording fees and all taxes, costs and other expenses, including Reasonable Attorneys' Fees, incident to the preparation, execution, acknowledgment, delivery and recordation of any of the same. By signing this Mortgage, Borrower authorizes Lender to file such financing statements, with or without the signature of Borrower, as Lender may elect, as may be necessary or desirable to perfect the lien of Lender's security interest in the Fixtures and Personal Property. Without limiting any other Omaha, Nebraska 18 provision herein, Borrower hereby authorizes Lender to file one or more financing statements and any renewal or continuation statements thereof, describing the Property and the proceeds of the Property, including, without limitation, a financing statement covering "all assets of Borrower all proceeds therefrom, and all rights and privileges with respect thereto." Borrower further authorizes Lender to file, with or without any additional signature from Borrower, as Lender may elect, such amendments and continuation statements as Lender may deem necessary or desirable from time to time to perfect or continue the lien of Lender's security interest in the Fixtures and Personal Property. Borrower hereby ratifies any financing statements that may have been filed by Lender in advance of the date hereof to perfect Lender's security interest in the Fixtures and Personal Property. 15. AFTER-ACQUIRED PROPERTY SECURED. Borrower shall subject to the lien of this Mortgage all right, title and interest of Borrower in and to all extensions, improvements, betterments, renewals, substitutions and replacements of, and all additions and appurtenances to, the Property hereinabove described, hereafter acquired by or released to Borrower, or constructed, assembled or placed by Borrower on the Real Property, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, encumbrance, conveyance, assignment or other act by Borrower, as fully, completely and with the same effect as though now owned by Borrower and specifically described herein, but at any and all times, Borrower will execute and deliver to Lender any and all such further assurances, mortgages, deeds of trust, conveyances, security agreements, financing statements or assignments thereof or security interests therein as Lender may reasonably require for the purpose of expressly and specifically subjecting the same to the lien of this Mortgage. 16. PAYMENTS BY LENDER ON BEHALF OF BORROWER. Borrower shall make payment of any taxes, assessments or public charges on or with respect to the Property before the same shall become delinquent, or to make payment of any insurance premiums or other charges, impositions, or liens herein or elsewhere required to be paid by Borrower, or if Borrower shall fail so to do, then Lender, at its sole option, but without obligation to do so, may make payment or payments of the same and also may redeem the Property from tax sale without any obligation to inquire into the validity of such taxes, assessments, charges, impositions or liens. In the case of any such payment by Lender, Borrower agrees to reimburse Lender, upon demand therefor, the amount of such payment and of any fees and expenses attendant in making the same, together with interest thereon at the lesser of either: (a) the highest rate of interest then allowed by the Laws of the State or, if controlling, the Laws of the United States, or (b) the then applicable interest rate of the Note plus five hundred (500) basis points per annum; and until paid such amounts and interest shall be added to and become part of the Loan to the same extent that this Mortgage secures the repayment of the Loan. In making payments authorized by the provisions of this Section 16, Lender may do so whenever, in Lender's sole judgment and discretion, such advance or advances are necessary Omaha, Nebraska 19 or desirable to protect the full security intended to be afforded by this Mortgage. Neither the right nor the exercise of the rights herein granted to Lender to make any such payments as aforesaid shall preclude Lender from exercising its option to cause the Loan to become immediately due and payable by reason of Borrower's default in making such payments as hereinabove required. 17. FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this Mortgage, Borrower shall deposit with Lender, together with and in addition to each monthly payment due on account of the Loan, an amount equal to one-twelfth (1/12th) of the annual total of such taxes, assessments, insurance premiums and other charges (all as estimated by Lender in its sole discretion) so that, at least thirty (30) days prior to the due date thereof, Lender shall be able to pay in full all such taxes, assessments, insurance premiums and other charges as the same shall become due. Lender may hold the sums so deposited without paying interest, commingle same with its general funds and/or apply the same to the payment of said taxes, assessments, insurance premiums or other charges as they become due and payable. If at any time the funds so held by Lender are insufficient to pay such taxes, assessments, insurance premiums or other charges as they become due and payable, Borrower shall immediately, upon Written Notice and demand by Lender, deposit with Lender the amount of such deficiency. The failure on the part of Borrower to do so shall entitle Lender, at Lender's sole option, to make such payments in accordance with the rights and pursuant to the conditions elsewhere provided in this Mortgage. Borrower hereby grants to Lender a security interest in all funds deposited with Lender, and such funds are hereby pledged by Borrower to Lender for the purpose of securing all indebtedness and obligations secured by this Mortgage. Whenever any default exists under this Mortgage, Lender may, at Lender's sole option but without an obligation so to do, apply any funds so held by Lender pursuant to this Section 17 toward the payment of the Loan, notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured, in such order and manner of application as Lender may elect. 18. CONDEMNATION; EMINENT DOMAIN. All claims and rights of action for, and all awards and other compensation heretofore or hereafter made to Borrower and all subsequent owners of the Property in any taking by eminent domain, recovery for inverse condemnation or by deed in lieu thereof, whether permanent or temporary, of all or any part of the Property or any easement or any appurtenance thereto, including severance and consequential damages and change in grade of any way, street, avenue, road, alley, passage or public place, are hereby assigned to Lender. Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, and authorizes, directs and empowers Lender, at the option of Lender as said attorney-in-fact, on behalf of Borrower, its successors and assigns, to adjust or compromise the claim for any such award, and alone to collect and receive the proceeds thereof, to give proper receipts and acquittances therefor and, after deducting any expenses of collection, Lender shall at its sole option either: Omaha, Nebraska 20 (a) apply the net proceeds as a credit upon any portion of the Loan, as selected by Lender, notwithstanding the fact that the amount owing thereon may not then be due and payable, or that the Loan is otherwise adequately secured. In the event Lender applies such awards to the reduction of the outstanding Loan evidenced by the Note, such proceeds shall be applied at par, and the monthly installments due and payable under the Note shall be reduced accordingly as calculated by Lender; however no such application shall serve to cure an existing default of Borrower; or (b) hold said proceeds without any allowance of interest, and make the same available for restoration or rebuilding of the Improvements. In the event that Lender makes said proceeds available to reimburse Borrower for the cost of the restoration or rebuilding of the Improvements on the Real Property, such proceeds shall be made available in the manner and under the same conditions as required under Section 8 hereof. If the proceeds are made available by Lender to reimburse Borrower for the cost of said restoration or rebuilding, any surplus which may remain out of said award after payment of such cost of restoration or rebuilding, shall be applied on account of the Loan at par notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan may otherwise be adequately secured. In the event of a taking or condemnation, provided that Borrower is not then in default hereunder beyond the expiration of applicable notice and cure periods, then notwithstanding any provision of this Section 19 to the contrary, Lender shall make condemnation proceeds available for restoration of the Property to the extent required under the terms of the Borders Lease. Borrower further covenants and agrees to give Lender immediate notice of the actual or threatened commencement of any proceedings under eminent domain, and to deliver to Lender copies of any and all papers served in connection with any such proceedings. Borrower further covenants and agrees to make, execute and deliver to Lender, at any time or times, upon request, free, clear and discharged of any encumbrance of any kind whatsoever, any and all further assignments and/or other instruments deemed necessary by Lender for the purpose of validly and sufficiently assigning all such awards and other compensation heretofore or hereafter made to Lender (including the assignment of any award from the United States government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for payment thereof). It shall be a default hereunder if either: (i) any part of any of the Improvements situated on the Real Property shall be condemned by any governmental authority having jurisdiction; or (ii) lands constituting a portion of the Real Property shall be condemned by any governmental authority having jurisdiction, such that the remaining Property is in violation of applicable parking, zoning, platting, or other ordinances, or fails to comply with the terms of the Occupancy Leases with Major Tenants. In either of said events, Lender shall be entitled to Omaha, Nebraska 21 exercise any or all remedies provided or referenced in this Mortgage or the other Loan Documents, including the application of condemnation proceeds to the outstanding principal balance of the Note at par, and the right to accelerate the maturity date of the Note and require payment in full without the imposition of a Prepayment Premium. 19. COSTS OF COLLECTION. In the event that the Note is placed in the hands of an attorney for collection, or in the event that Lender shall become a party either as plaintiff or as defendant, in any action, suit, appeal or legal proceeding (including, without limitation, foreclosure, condemnation, bankruptcy, administrative proceedings or any proceeding wherein proof of claim is by law required to be filed), hearing, motion or application before any court or administrative body in relation to the Property or the lien and security interest granted or created hereby or herein, or for the recovery or protection of the Loan or the Property, or for the foreclosure of this Mortgage, or for the enforcement of the terms and conditions of the Loan Documents, Borrower shall indemnify, save, defend and hold Lender harmless from and against any and all Losses incurred by Lender on account thereof, and Borrower shall repay, on demand, all such Losses, together with interest thereon until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums, if unpaid, shall be added to and become a part of the Loan. 20. DEFAULT RATE. Any sums not paid when due, whether maturing by lapse of time or by reason of acceleration under the provisions of the Note, this Mortgage or any of the other Loan Documents, and whether principal, interest or money owing for advancements pursuant to the terms of this Mortgage or any other Loan Document, shall bear interest until paid at the lesser of either (a) the highest rate of interest then allowed by the Laws of the State, or, if controlling, the Laws of the United States, or (b) the then applicable rate of interest of the Note plus five hundred (500) basis points per annum; all of which sums shall be added to and become a part of the Loan. 21. SAVINGS CLAUSE. Notwithstanding any provisions in the Note or in this Mortgage to the contrary, the total liability for payments in the nature of interest, including but not limited to Prepayment Premiums, default interest and late payment charges, shall not exceed the limits imposed by the Laws of the State or, if controlling, the Laws of the United States, relating to maximum allowable charges of interest. Lender shall not be entitled to receive, collect or apply, as interest on the Loan, any amount in excess of the maximum lawful rate of interest permitted to be charged by any Laws. In the event Lender ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be applied to reduce the unpaid principal balance of the Loan evidenced by the Note. If the unpaid principal balance of such Loan has been paid in full, any remaining excess shall be forthwith returned to Borrower. Omaha, Nebraska 22 22. BANKRUPTCY, REORGANIZATION OR ASSIGNMENT. (a) It shall be a default hereunder if Borrower or any general partner or managing member of Borrower shall: (a) elect to dissolve or liquidate its business organization or wind up its business affairs without receiving the prior written approval of Lender; (b) consent to the appointment of a receiver, trustee or liquidator of all or a substantial part of its assets; (c) be adjudicated as bankrupt or insolvent, or file a voluntary petition in bankruptcy, or admit in writing its inability to pay its debts as they become due; (d) make a general assignment for the benefit of creditors; (e) file a petition under or take advantage of any insolvency law; (f) file an answer admitting the material allegations of a petition filed against Borrower or any general partner or managing member of Borrower in any bankruptcy, reorganization or insolvency proceeding, or fail to cause the dismissal of such petition within thirty (30) days after the filing of said petition; (g) take action for the purpose of effecting any of the foregoing; or (h) if any order, judgment or decree shall be entered upon an application of a creditor of Borrower or any general partner or managing member of Borrower by a court of competent jurisdiction approving a petition seeking appointment of a receiver or trustee of all or a substantial part of Borrower's assets or any of Borrower's general partner's or managing member's assets and such order, judgment or decree shall continue unstayed and in effect for a period of thirty (30) days. (b) Borrower covenants and agrees that it has not and shall not: (i) engage in any business or activity other than the acquisition, ownership, operation and maintenance of the Property, and activities incidental thereto; (ii) acquire or own any material asset other than (1) the Property, and (2) such incidental Fixtures and Personal Property as may be necessary for the operation of the Property; (iii) merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent; (iv) fail to preserve its existence as an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Borrower's Governing Documents (as hereafter defined); (v) own any subsidiary or make any investment in or acquire the obligations or securities of any other person or entity without the consent of Lender; Omaha, Nebraska 23 (vi) commingle its assets with the assets of any of its partner, members, shareholders, affiliates, or of any other person or entity or transfer any assets to any such person or entity other than distributions on account of equity interests in the Borrower permitted hereunder and properly accounted for; (vii) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation, other than the Affiliate Loans), other than the Loan, except unsecured trade and operational debt incurred with trade creditors in the ordinary course of its business of owning and operating the Property in such amounts as are normal and reasonable under the circumstances, provided that such debt is not evidenced by a note and is paid when due and provided in any event the outstanding principal balance of such debt shall not exceed at any one time 1% of the outstanding Loan. Borrower shall not be deemed in default of the foregoing restrictions by virtue of any guaranty or cross default agreement delivered by Borrower with respect to the Affiliate Loans; (viii) allow any person or entity to pay its debts and liabilities (except a Guarantor - or in connection with the cross-default and cross collateralization of the Affiliate Loans) or fail to pay its debts and liabilities solely from its own assets; (ix) fail to maintain its records, books of account and bank accounts separate and apart from those of the shareholders, partners, members, principals and affiliates of Borrower, the affiliates of a shareholder, partner or member of Borrower, and any other person or entity or fail to prepare and maintain its own financial statements in accordance with generally accepted accounting principles and susceptible to audit, or if such financial statements are consolidated fail to cause such financial statements to contain footnotes disclosing that the Property is actually owned by the Borrower; (x) enter into any contract or agreement with any shareholder, partner, member, principal or affiliate of Borrower, any guarantor of all or a portion of the Loan (a "GUARANTOR") or any shareholder, partner, member, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any shareholder, partner, member, principal or affiliate of Borrower or Guarantor, or any shareholder, partner, member, principal or affiliate thereof; (xi) seek dissolution or winding up, in whole or in part; (xii) fail to correct any known misunderstandings regarding the separate identity of Borrower; Omaha, Nebraska 24 (xiii) hold itself out to be responsible or pledge its assets or credit worthiness for the debts of another person or entity or allow any person or entity to hold itself out to be responsible or pledge its assets or credit worthiness for the debts of the Borrower (except for a Guarantor); (xiv) make any loans or advances to any third party, including any shareholder, partner, member, principal or affiliate of Borrower, or any shareholder, partner, member, principal or affiliate thereof, except as may be required in connection with the cross default and cross collateralization of the Affiliate Loans; (xv) fail to file its own tax returns, if required under applicable law, or to use separate contracts, purchase orders, stationary, invoices and checks, except that Borrower may file a consolidated tax return with Agree Limited Partnership for reporting purposes; (xvi) fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (1) to mislead others as to the entity with which such other party is transacting business, or (2) to suggest that Borrower is responsible for the debts of any third party (including any shareholder, partner, member, principal or affiliate of Borrower, or any shareholder, partner, member, principal or affiliate thereof); (xvii) fail to allocate fairly and reasonably among Borrower and any third party (including, without limitation, any Guarantor) any overhead for common employees, shared office space or other overhead and administrative expenses; (xviii) allow any person or entity to pay the salaries of its own employees or fail to maintain a sufficient number of employees for its contemplated business operations; (xix) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xx) share any common logo with or hold itself out as or be considered as a department or division of (1) any shareholder, partner, principal, member or affiliate of Borrower, (2) any affiliate of a shareholder, partner, principal, member or affiliate of Borrower, or (3) any other person or entity or allow any person or entity to identify the Borrower as a department or division of that person or entity; or Omaha, Nebraska 25 (xxi) conceal assets from any creditor, or enter into any transaction with the intent to hinder, delay or defraud creditors of the Borrower or the creditors of any other person or entity; 23. TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It is understood by Borrower that time is of the essence hereof in connection with all obligations of Borrower herein and any of the other Loan Documents. Lender, at its sole option, may declare the Loan, as well as all other monies secured or evidenced hereby or by any of the other Loan Documents, including, without limitation, all Prepayment Premiums (to the extent permitted by the Laws of the State) and late payment charges, to be in default and forthwith due and payable, in the event: (1) Borrower defaults in the payment of any monthly installment of the Note, whether of principal or interest, or both, or in the payment of any other sums of money referred to herein or in the Note, the Borrower Cross-Default Guaranty or in any of the other Loan Documents, promptly and fully when the same shall be due, without notice or demand from Lender to Borrower in regard to such Monetary Default (as hereinafter defined), and any such Monetary Default remains uncured for a period of five (5) days after Written Notice thereof has been given by Lender to Borrower, unless Lender has previously given Borrower such Written Notice for a failure to pay in the then-current Loan Year (as defined in the Note), in which event no such notice need be given and no right to cure need be afforded Borrower as to any further Monetary Default during such Loan Year. (2) Borrower breaches or defaults on any of the terms, covenants, conditions and agreements of the Note, the Borrower Cross-Default Guaranty, this Mortgage, or any other Loan Documents; or in the event that each and every one of said terms, covenants, conditions and agreements is not otherwise either duly, promptly and fully discharged or performed, and any such Non-Monetary Default (as hereinafter defined) remains uncured for a period of thirty (30) days after Written Notice thereof has been delivered from Lender to Borrower; unless such Non-Monetary Default cannot be cured within said thirty (30) day period, in which event Borrower shall have a reasonable period of time to complete cure, provided that action to cure such Non-Monetary Default is promptly commenced within said thirty (30) day period, and Borrower is, in Lender's sole judgment, not diminishing or impairing the value of the Property, and is diligently pursuing a cure to completion, but in no event longer than ninety (90) days. (3) Any representation or warranty of Borrower or of its members, general partners, principals, affiliates, agents or employees, or of any Guarantor made Omaha, Nebraska 26 herein or in or in any other Loan Document, in any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made. (4) Any seizure or forfeiture of the Property, or any portion thereof, or Borrower's interest therein, resulting from criminal wrongdoing or other unlawful action of Borrower, its affiliates, or any tenant in the Property under any federal, state or local law. (5) If Borrower consummates a transaction which would cause this Mortgage or Lender's exercise of its rights under this Mortgage, the Note or the other Loan Documents to constitute a nonexempt prohibited transaction under ERISA or result in a violation of a state statute regulating governmental plans, subjecting Lender to liability for a violation of ERISA or a state statute. (6) Any default occurs in the performance of any covenant or obligation of Borrower or any other party under any indemnity or guaranty delivered to Lender in connection with the Loan and such default continues beyond the expiration of applicable notice and cure periods. (7) Any default occurs under any Affiliate Loan which default continues beyond the expiration of applicable notice and cure periods. Upon the occurrence of any one of the above events, and at the option of Lender, the principal of and the interest accrued on the Loan and all other sums secured by this Mortgage and the other Loan Documents shall immediately become due and payable as if all of said sums of money were originally stipulated to be paid on such day. In addition, Lender may avail itself of all rights and remedies provided by law or equity, and may foreclose or prosecute a suit at law or in equity as if all monies secured hereby had matured prior to its institution, anything in this Mortgage or any of the other Loan Documents to the contrary notwithstanding. Lender shall have no obligation to give Borrower notice of, or any period to cure, any Monetary Default or any Incurable Default (as hereinafter defined) prior to exercising its rights, powers, privileges and remedies. As used herein, the term "MONETARY DEFAULT" shall mean any default which can be cured by the payment of money such as, but not limited to, the payment of principal and interest due under the Note, or the payment of taxes, assessments and insurance premiums when due as provided in this Mortgage. As used herein, the term "NON-MONETARY DEFAULT" shall mean any default that is not a Monetary Default or an Incurable Default. As used herein, the term "INCURABLE DEFAULT" shall mean either: (i) any voluntary or involuntary sale, assignment, mortgaging, encumbering or transfer in violation of the covenants contained herein or any of the other Loan Documents; or (ii) if Borrower, or any person or entity comprising Omaha, Nebraska 27 Borrower or any guarantor or indemnitor of the Loan, should breach any of the provisions of Section 22. 24. FORECLOSURE. Upon the occurrence of a default hereunder, Lender may institute an action to foreclose this Mortgage as to the amount so declared due and payable, and thereupon the Property (or any portion thereof) shall be sold according to law to satisfy and pay the same, together with all costs, expenses and allowances thereof, including, without limitation, Reasonable Attorneys' Fees. The Property may be sold in one parcel, several parcels or groups of parcels, and Lender shall be entitled to bid at the sale, and, if Lender is the highest bidder for the Property or any part or parts thereof, Lender shall be entitled to purchase the same. The failure or omission on the part of Lender to exercise the option for acceleration of maturity of the Note and foreclosure of this Mortgage following any default as aforesaid or to exercise any other option or remedy granted hereunder to Lender when entitled to do so in any one or more instances, or the acceptance by Lender of partial payment of the Loan, whether before or subsequent to Borrower's default hereunder, shall not constitute a waiver of any such default or the right to exercise any such option or remedy, but such option or remedy shall remain continuously in force. Acceleration of the maturity of the Note, once claimed hereunder by Lender, at the option of Lender, may be rescinded by written acknowledgment to that effect by Lender, but the tender and acceptance of partial payments alone shall not in any way either affect or rescind such acceleration of maturity, nor act as a waiver, accord and satisfaction, modification, novation or similar defense. 25. UCC REMEDIES. (a) This Mortgage constitutes a Security Agreement under the UCC with respect to any part of the Property that may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate, 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: (1) No financing statement covering any of the Property or any proceeds thereof is on file in any public office; and Borrower will, at its cost and expense, upon demand, furnish to Lender such further information and will execute and deliver to Lender such financing statements and other documents in form reasonably satisfactory to Lender and will do all such acts and things as Lender 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 Property as security for the Loan, subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or desirable; Omaha, Nebraska 28 (2) The terms and provisions contained in this section and in Section 24(b) of this Mortgage shall, unless the context otherwise requires, have the meanings and be construed as provided in the Code; (3) This Mortgage constitutes a security agreement and financing statement under the UCC with respect to the Property. As such, this Mortgage covers any portion of the Property that is personal property including all items which are to become fixtures. Borrower is the "Debtor" and Lender is the "Secured Party" (as those terms are defined and used in the UCC) insofar as this Mortgage constitutes a financing statement. (b) Upon the occurrence of a default, Lender may exercise its rights of enforcement with respect to the Fixtures and Personal Property under the UCC, and in conjunction with, in addition to or in substitution for those rights and remedies: (1) Written Notice mailed to Borrower as provided herein ten (10) days prior to the date of public sale of the Fixtures and Personal Property or prior to the date after which private sale of the Fixtures and Personal Property will be made shall constitute reasonable notice; (2) any sale made pursuant to the provisions of this Section shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Mortgaged Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Fixtures and Personal Property hereunder as is required for such sale of the Mortgaged Property under power of sale; (3) in the event of a foreclosure sale, whether made under the terms hereof, or under judgment of a court, the Fixtures and Personal Property and the Mortgaged Property may, at the option of Lender, be sold as a whole; (4) it shall not be necessary that Lender take possession of the Fixtures and Personal Property or any part thereof prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that the Fixtures and Personal Property or any part thereof be present at the location of such sale; (5) prior to application of proceeds of disposition of the Fixtures and Personal Property to the secured indebtedness, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the Reasonable Attorneys' Fees and other legal expenses incurred by Lender; Omaha, Nebraska 29 (6) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the indebtedness or as to the occurrence of any default, or as to Lender having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Lender, shall be taken as prima facie evidence of the truth of the facts so stated and recited; (7) Lender may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the sending of notices and the conduct of the sale, but in the name and on behalf of Lender; and (8) this Mortgage covers Goods which are or are to become Fixtures related to the Real Property, and covers As-Extracted Collateral related to the Real Property. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records in the Office of the County Clerk where the Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement As-Extracted Collateral with respect to all As-Extracted Collateral included within the Real Property (including, without limitation, all oil, gas, other minerals, and other substances of value which may be extracted from the earth and all accounts arising out of the sale at the wellhead or minehead thereof), and is to be filed for record in the real estate records of the county where the Property is situated. The mailing address of Borrower is set forth in Section 43 of this Mortgage and the address of Lender from which information concerning the security interest may be obtained is the address of Lender set forth in Section 43 of this Mortgage. 26. PROTECTION OF LENDER'S SECURITY. At any time after default hereunder, Lender, or Lender's agents or contractors, is authorized, without notice and in Lender's sole discretion, to enter upon and take possession of the Property or any part thereof, and to perform any acts which Lender deems necessary or proper to conserve the security interest herein intended to be provided by the Property, to operate any business or businesses conducted thereon, and to collect and receive all Rents thereof and therefrom, including those past due as well as those accruing thereafter. 27. APPOINTMENT OF RECEIVER. If, at any time after a default hereunder, Lender deems, in Lender's sole discretion, that a receivership may be necessary to protect the Property or its Rents, whether before or after maturity of the Note and whether before or at the time of or after the institution of foreclosure or suit to collect the Loan or to enforce this Omaha, Nebraska 30 Mortgage or any of the other Loan Documents, Lender, as a matter of strict right and regardless of the value of the Property or the amounts due hereunder or secured hereby, or of the solvency of any party bound for the payment of such indebtedness, shall have the right, upon ex parte application and without notice to anyone, and by any court having jurisdiction, to the appointment of a receiver to take charge of, manage, preserve, protect and operate the Property, to collect the Rents thereof, to make all necessary and needful repairs, and to pay all taxes, assessments, insurance premiums and other such charges against and expenses of the Property, and to do such other acts as may by such court be authorized and directed, and after payment of the expenses of the receivership and the management of the Property, to apply the net proceeds of such receivership in reduction of the Loan or in such other manner as the said court shall direct notwithstanding the fact that the amount owing thereon may not then be due and payable or the said Loan is otherwise adequately secured. Such receivership shall, at the option of Lender, continue until full payment of all sums hereby secured or until title to the Property shall have passed by sale under this Mortgage. Borrower hereby specifically waives its right to object to the appointment of a receiver as aforesaid, and hereby expressly agrees that such appointment shall be made as an admitted equity and as a matter of absolute right to Lender. 28. RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The rights and remedies herein provided are cumulative, and Lender, as the holder of the Note and of every other obligation secured hereby, may recover judgment thereon, issue execution therefor and resort to every other right or remedy available at law or in equity, without first exhausting any right or remedy available to Lender and without affecting or impairing the security of any right or remedy afforded hereby, and no enumeration of special rights or powers by any provisions hereof shall be construed to limit any grant of general rights or powers, or to take away or limit any and all rights granted to or vested in Lender by law or equity. Borrower further agrees that no delay or omission on the part of Lender to exercise any rights or powers accruing to it hereunder shall impair any such right or power, or shall be construed to be a waiver of any such default hereunder or an acquiescence therein; and every right, power and remedy granted herein or by law or equity to Lender may be exercised from time to time as often as Lender deems expedient. Lender may resort to any security given by this Mortgage or to any other security now existing or hereafter given to secure the payment of the Loan, in whole or in part, and in such portions and in such order as may seem best to Lender in its sole discretion, and any such action shall not be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Mortgage. To the full extent Borrower may do so, Borrower agrees that Borrower will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force pertaining to the rights and remedies of sureties or providing for any appraisement, valuation, stay, extension or redemption, and Borrower, for Borrower and Borrower's heirs, devisees, representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by law, hereby Omaha, Nebraska 31 waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of the assets of Borrower, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and security interests hereby created. Borrower shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right of Lender under the terms of this Mortgage to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right of Lender under the terms of this Mortgage to the payment of such indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. If any law referred to in this Section and now in force, of which Borrower or Borrower's heirs, devisees, representatives, successors and assigns and such other persons claiming any interest in the Property might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. 29. MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without notice and without regard to the consideration, if any, paid therefor, and notwithstanding the existence at that time of any inferior mortgages, deeds of trust, or other liens thereon, may release any part of the security described herein, or may release any person or entity liable for the Loan without in any way affecting the priority of this Mortgage, to the full extent of the Loan remaining unpaid hereunder, upon any part of the security not expressly released. Lender may, at its option and within Lender's sole discretion, also agree with any party obligated on the Loan, or having any interest in the security described herein, to extend the time for payment of any part or all of the Loan, and such agreement shall not, in any way, release or impair this Mortgage, but shall extend the same as against the title of all parties having any interest in said security, which interest is subject to this Mortgage. 30. PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the Property shall be Borrower, or such other manager as may be first approved in writing by Lender. The exclusive leasing agent of the Property, if other than Borrower or the foregoing party, shall be first approved in writing by Lender. The management and leasing contracts (or in the absence of any such written contract, a letter so stating and further identifying the name of the person or entity charged with the responsibility for managing and/or leasing the Property) shall be subordinate to this Mortgage, and satisfactory to and subject to the prior written approval of Lender throughout the term of the Loan. Upon default in either of these requirements, then the whole of the Loan hereby secured shall, at the election of Lender, become immediately due and payable, together with any Prepayment Premium, late payment charges and all other sums required by the Note or the other Loan Documents, and Lender shall be entitled to exercise any or all remedies provided for or referenced in this Mortgage. Omaha, Nebraska 32 31. MODIFICATION NOT A WAIVER. In the event Lender (a) releases, as aforesaid, any part of the security described herein or any person or entity liable for the Loan; (b) grants an extension of time for the payment of the Note; (c) takes other or additional security for the payment of the Note; or (d) waives or fails to exercise any rights granted herein, in the Note, or any of the other Loan Documents, any said act or omission shall not release Borrower, subsequent purchasers of the Property or any part thereof, or makers, sureties, endorsers or guarantors of the Note, if any, from any obligation or any covenant of this Mortgage, the Note or any of the other Loan Documents, nor preclude Lender from exercising any right, power or privilege herein granted or intended to be granted in the event of any other default then made, or any subsequent default. 32. TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER; ASSUMPTION. Except as set forth in Section 38(b) hereof, without the prior written consent of Lender, the sale, transfer, assignment or conveyance of all or any portion of the Property, or the transfer, assignment or conveyance of a controlling interest in Borrower or its general partner or managing member, or any guarantor, whether voluntary or by operation of law, without the prior written consent of Lender, shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to accelerate all sums due on the Note, together with any Prepayment Premiums (to the extent permitted by the Laws of the State), late payment charges or any other amounts secured hereby. Lender may, however, elect to waive the option to accelerate granted hereunder if, prior to any such sale, transfer, assignment or conveyance of the Property, the following conditions shall be fully satisfied: (a) Lender acknowledges in writing that, in Lender's sole discretion, the creditworthiness of the proposed transferee and the ability and experience of the proposed transferee to operate the Property are satisfactory to Lender, (b) Lender and the proposed transferee shall enter into an agreement in writing that (i) the rate of interest payable on the Loan shall be at such rate as Lender shall determine, (ii) the repayment schedule as set forth in the Note shall be modified by Lender, in Lender's sole discretion, to initiate amortization or modify the existing amortization schedule in order to amortize the then remaining unpaid principal balance of the Note over a period of time as determined by Lender, in Lender's sole discretion, without a change in the maturity date of the Note, and (iii) the proposed transferee shall assume all obligations of Borrower under the Note, this Mortgage and the other Loan Documents in writing and an assumption fee, to be determined by Lender in Lender's sole discretion, may be charged by Lender; (c) Lender shall receive, for Lender's review and approval, copies of all transfer documents; and (d) Borrower or the transferee shall pay all costs and expenses in connection with such transfer and assumption, including, without limitation, all fees and expenses incurred by Lender. Borrower, or any subsequent owner of the Property or any portion thereof, shall do all things necessary to preserve and keep in full force and effect its and their legal existence, franchises, rights and privileges as a corporation, partnership or limited liability company, as the case may be, under the laws of the State of its formation and its right to own property and transact business in the State. It shall be a default hereunder if Borrower, or any subsequent Omaha, Nebraska 33 owner of the Property or any portion thereof, shall amend, modify, transfer, assign or terminate the applicable governing documents for such entity, including its partnership agreement, certificate of partnership, operating agreement, articles of organization, regulations, articles of incorporation or bylaws, as the case may be (as applicable, the "GOVERNING DOCUMENTS"), of Borrower or such subsequent owner without the prior written consent of Lender. Borrower, or such subsequent owner of the Property, shall provide Lender with copies of any proposed amendment to its applicable Governing Documents, so that Lender may, in Lender's sole discretion, determine whether such amendment adversely affects Lender, the Property or the security value thereof. Provided, however, that any amendment, modification, transfer, assignment or termination of Borrower's applicable Governing Documents or any other action pursuant to which the current general partner or managing member of Borrower shall either: (i) cease to be the general partner or managing member of Borrower; or (ii) except to the extent permitted herein, cease to own or maintain a partnership or membership interest in Borrower equal to or greater than its partnership or membership interest at the time this Mortgage is executed, shall be deemed to have a material adverse effect upon Lender and the Property, and shall be a default hereunder. Borrower shall not change its name or identity in any manner which may make any financing or continuation statement filed in connection with the Loan seriously misleading within the meaning of the UCC enacted in the State or change its jurisdiction of organization unless Borrower shall have delivered to Lender written notice thereof not less than 30 days before the effective date of such change and shall have taken all action which Lender determines to be reasonably necessary or desirable to confirm and protect Lender's security interests and rights under this Mortgage and the perfection and priority thereof. Borrower will not change its principal places of business unless it shall have given Lender prior written notice of its intent to do so not less than thirty (30) days in advance of the effective date of such change. Borrower shall bear all costs incurred by Lender in connection with any such change including, without limitation, Reasonable Attorney's Fees. In the event the ownership of the Property, or any part thereof, shall become vested in a person or entity other than Borrower, whether with or without the prior written consent of Lender, Lender may, without notice to Borrower, deal with such successor or successors in interest with reference to the Property, this Mortgage and the other Loan Documents, in the same manner and to the same extent as with Borrower without in any way vitiating or discharging Borrower's liability hereunder or under any of the Loan Documents. No sale, transfer or conveyance of the Property, no forbearance on the part of Lender and no extension of time given by Lender to Borrower for the payment of the Note shall operate to release, discharge, modify, change or affect the original liability of Borrower, either in whole or in part, unless expressly set forth in writing executed by Lender. Notwithstanding anything contained herein to the contrary, Borrower hereby waives any right it now has or may hereafter have to require Lender to prove an impairment of its security as a condition to the exercise of Lender's rights under this Section 32. Omaha, Nebraska 34 A sale, transfer, assignment or conveyance within the meaning of this Section shall be deemed to include, but not be limited to, (a) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (b) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a tenant under an Occupancy Lease or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any leases or any Rents; (c) if Borrower, any guarantor, any indemnitor, or any general partner or managing member of Borrower, is a corporation, the voluntary or involuntary sale, conveyance, transfer or pledge of such corporation's stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise), or the creation or issuance of new stock by which an aggregate of more than ten percent (10%) of such corporation's stock shall be vested in a party or parties who are not now stockholders; and (d) if Borrower, any guarantor, indemnitor, or any general partner or managing member of Borrower, is a limited partnership, general partnership, limited liability partnership, limited liability company, or joint venture, the change, removal or resignation of a general partner, managing partner, or member, or the transfer or pledge of the interest of any general partner, managing partner, or member or any profits or proceeds relating to such interest. Nothing in this Mortgage shall be construed to limit or restrict the transfer of shares of Agree Realty Corporation. Notwithstanding anything contained in this Section 32 to the contrary, as long as no default, or event which, with notice or the passage of time or both, could result in a default, has occurred hereunder, under the Note or any of the other Loan Documents, Lender shall permit one (1) bona fide arm's length transfer of the Property to another borrowing entity without a change in the terms of the Loan; provided, however, that no such transfer shall be valid or permitted hereunder unless: (i) Lender receives prior Written Notice of such proposed transfer; (ii) such proposed transferee and any substitute guarantor has been approved in writing by Lender (taking into consideration such factors as transferee's creditworthiness, business experience, financial condition and managerial capabilities); (iii) the transferee's (and its sole general partner's or managing member's) single purpose and bankruptcy remote character are satisfactory to Lender in its sole discretion; (iv) Lender has obtained such other legal opinions regarding substantive consolidation issues, enforceability of the assumption documents, no adverse impact on the Securities or any REMIC holding the Note and similar matters as Lender may require, (v) the execution and delivery to Lender of a written assumption agreement covering the Note this Mortage, the Borrower Cross-Default Guaranty and the other Loan Documents and/or substitute guaranty (in Lender's sole and absolute discretion) and such modifications to the Loan Documents executed by such parties and containing such terms and conditions as Lender may require in its sole and absolute discretion prior to such sale or transfer (provided that in the event the Loan is included in a REMIC and is a performing Loan, no modification to the terms and conditions shall be made or permitted that would cause (A) any adverse tax consequences to the REMIC or any holders of any Mortgage-Backed Pass-Through Securities, (B) this Mortgage to fail to be a Qualifying Omaha, Nebraska 35 Security Instrument under applicable federal law relating to REMIC's, or (C) result in a taxation of the income from the Loan to the REMIC or cause a loss of REMIC status), (vi) if applicable, the delivery to Lender of an endorsement (at Borrower's sole cost and expense) to Lender's policy of title insurance then insuring the lien created by this Mortgage in form and substance acceptable to Lender in its sole judgment; (vii) Lender is paid a cash assumption fee in accordance with the following schedule: Two percent (2%) of the then outstanding principal balance of the Note if such outstanding principal balance is less than or equal to Three Million Dollars ($3,000,000.00), one and one-half percent (1 1/2%) of the then outstanding principal balance of the Note if such outstanding principal balance is in excess of Three Million Dollars ($3,000,000.00); (viii) Borrower pays all fees and expenses incurred by Lender in connection with such transfer and assumption, including, without limitation, inspection and investigation fees, title insurance charges, and Reasonable Attorneys' Fees; (ix) Lender approves the management agreement and leasing agreement, and the management and leasing company to be employed by the proposed transferee and (x) the transferee is simultaneously purchasing each of the Properties which secure the Affiliate Loans, to the extent such Affiliate Loans remain outstanding. Any transfer of all or any portion of the Property which does not strictly comply with the terms and conditions of the foregoing shall be a default hereunder, and shall entitle Lender to exercise all rights and remedies provided in this Mortgage and the other Loan Documents. This one-time right of transfer shall apply to the Borrower named herein and not to any subsequent owner of the Property. 33. FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the Note remains unpaid, Borrower shall not, either voluntarily or involuntarily, permit the Property or any part thereof to become subject to any secondary or subordinate lien, mortgage, deed of trust, security interest or encumbrance of any kind whatsoever without the prior written consent of Lender, and the imposition of any such secondary lien, mortgage, deed of trust, security interest or encumbrance without the approval of Lender shall constitute a default hereunder, and entitle Lender, at Lender's sole option, to declare the outstanding principal balance of the Note, all accrued and unpaid interest thereon, Prepayment Premiums (to the extent permitted by the laws of the State, late payment charges and any other amounts secured hereby to be and become immediately due and payable in full. In the event that Lender shall hereafter give its written consent to the imposition of any such secondary lien, mortgage, deed of trust, security interest or other encumbrance upon the Property, Lender, at Lender's sole option, shall be entitled to accelerate the maturity of the Note and exercise any and all remedies provided and available to Lender hereunder and in the other Loan Documents in the event that the holder of any such secondary lien or encumbrance shall institute foreclosure or other proceedings to enforce the same; it being understood and agreed that a default under any instrument or document evidencing, securing or secured by any such secondary lien or encumbrance shall be and constitute a default hereunder. In the event all or any portion of the proceeds of the Loan are used for the purpose of retiring debt or debts secured by prior liens on the Property, Lender shall be subrogated to the rights and lien priority of the holder or holders of the lien or liens so discharged. Omaha, Nebraska 36 34. CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Borrower agrees that the making of any oil, gas or mineral lease, or the sale or conveyance of any mineral interest or right to explore for minerals under, through or upon the Property, would impair the value of the Property, and that Borrower shall have no right, power or authority to lease the Property, or any part thereof, for oil, gas or other mineral purposes, or to grant, assign or convey any mineral interest of any nature, or the right to explore for oil, gas and other minerals, without first obtaining Lender's express written permission therefor, which permission shall not be valid until recorded among the Public Records of the county in which the Property is located. Borrower further agrees that if Borrower shall make, execute, or enter into any such lease or attempt to grant any such mineral rights without such prior written permission of Lender, then Lender shall have the option, without notice, to declare the same to be a default hereunder, and to declare the Loan immediately due and payable in full. Whether or not Lender shall consent to such lease or grant of mineral rights, Lender shall receive the entire consideration to be paid for any such lease or grant of mineral rights, with the same to be applied to the Loan notwithstanding the fact that the amount owing thereon may not then be due and payable or that the Loan is otherwise adequately secured; provided, however, that the acceptance of such consideration shall in no way impair the lien of this Mortgage on the Property or cure any existing Monetary Default. 35. ESTOPPEL CERTIFICATION BY BORROWER. Borrower, upon request of Lender therefor made either personally or by mail, shall certify in writing to Lender (or any party designated by Lender), in a form satisfactory to Lender or such designee, the amount of principal and interest then outstanding under the terms of the Note and any other sums due and owing under this Mortgage or any of the other Loan Documents, and whether any offsets or defenses exist against the Loan. Such certification shall be made by Borrower within ten (10) days if the request is made personally, or within twenty (20) days if the request is made by mail. 36. CROSS-DEFAULT. The Note is also secured by the terms, conditions and provisions of the Assignment, by three Cross-Default Guaranty Agreements of even date herewith from Agree - Milestone Center Project, L.L.C., a Delaware limited liability company, as guarantor for the Agree-Milestone Loan; Agree - Columbia Crossing Project, L.L.C., a Delaware limited liability company, as guarantor for the Agree-Columbia Loan; and Oklahoma City, respectively in favor of Lender (hereinafter individually or collectively referred to as the "AFFILIATED-BORROWER CROSS-DEFAULT GUARANTYS") and, additionally, may be secured by contracts or agreements of guaranty or other security instruments. The terms, covenants, conditions and agreements of each security instrument shall be considered a part hereof as fully as if set forth herein verbatim. Any default under this Mortgage, any Affiliated Borrower Cross-Default Guaranty or any of the other Loan Documents shall constitute a default hereunder and under each of the other Loan Documents. Notwithstanding the foregoing, the enforcement or attempted enforcement of this Mortgage or any of the other Loan Documents now or hereafter held by Lender shall not prejudice or in any manner affect Omaha, Nebraska 37 the right of Lender to enforce any other Loan Document; it being understood and agreed that Lender shall be entitled to enforce this Mortgage and any of the other Loan Documents now or hereafter held by it in such order and manner as Lender, in its sole discretion, shall determine. 37. EXAMINATION OF BORROWER'S RECORDS. Borrower will maintain complete and accurate books and records showing in detail the income and expenses of the Property, and will permit Lender and its agents, contractors or representatives to examine said books and records and all supporting vouchers and data during normal business hours and from time to time upon request by Lender, in such place as such books and records are customarily kept. Borrower will furnish to Lender, within one hundred twenty (120) days after the close of each respective fiscal period annual and quarterly financial statements (income statements and a balance sheet) for the Borrower and the Property. Borrower will furnish to Lender on or before 45 calendar days after the end of each calendar quarter the following items, each certified by Borrower as being true and correct, in such format and in such detail as Lender or its servicer may request: (a) a written statement (rent roll) dated as of the last day of each such calendar quarter identifying each of the Occupancy Leases by the term, space occupied, rental required to be paid (including percentage rents and tenant sales), security deposit paid, any rental concessions, all rent escalations, any rents paid more than one month in advance, any special provisions or inducements granted to tenants, any taxes, maintenance and other common charges paid by tenants, all vacancies and identifying any defaults or payment delinquencies thereunder; and (b) quarterly and year-to-date operating statements prepared for each calendar quarter during each such reporting period detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow. These statements shall be in form acceptable to Lender and its servicer, shall be prepared in accordance with generally accepted accounting principles, and shall include a rent roll, certified as true and correct by Borrower. The statements shall show in detail all income derived from and expenses incurred in connection with the ownership of the Property, including current annual sales figures for all Major Tenants of the Property if required under the Major Tenant leases or if such financial information is otherwise available. Borrower shall deliver to Lender, for Borrower, or any entity with whom Borrower's tax return is consolidated, copies of all income tax returns, requests for extension and other similar items contemporaneously with its delivery of same to the Internal Revenue Service. In the event Borrower fails to provide such statements to Lender within the time prescribed above, Borrower shall pay Lender the sum of $200.00 in administrative expenses for each successive month for which the statements are delinquent (or in the case of such statements to be delivered prior to the transfer of the Loan to Investor (hereafter defined), for each successive week for which the statements are delinquent). Upon a default hereunder, Lender shall have the right to require that said financial statements be audited and certified by a certified public accountant acceptable to Lender, at the sole cost and expense of Borrower. Omaha, Nebraska 38 Prior to the transfer of the Loan to Investor by Lender, Borrower shall deliver to Lender the reports required above on a monthly basis. Such reports shall be delivered within ten calendar days after the end of each calendar month. In addition, at the request of Lender, but in no case more often than once a quarter nor more than three (3) times during the term of the Loan, unless a default has occurred, Borrower shall furnish to Lender (i) unaudited financial statements (balance sheet, income statement, cash flow statement and current rent roll) covering operation of the Property for periods other than those set forth in the preceding paragraph and (ii) unaudited financial statements (balance sheets, income statements, and cash flow statements) for Borrower, its general partner(s), shareholder(s) or member(s) (whichever is applicable) and for such other principals of Borrower as designated by Lender, provided that for so long as the Property is held by Borrower such statements shall be required only for Borrower and Agree Realty Corporation. All such statements shall be certified to Lender to be complete, correct, and accurate by the individual (for an individual's statements) or by an authorized representative of the entity (if statements are for a partnership, corporation or limited liability company). Any inspection or audit of the Property or the books and records of Borrower, or the procuring of documents and financial and other information, by or on behalf of Lender, shall be at Borrower's expense and shall be for Lender's protection only, and shall not constitute any assumption of responsibility or liability by Lender to Borrower or anyone else with regard to the condition, construction, maintenance or operation of the Property, nor Lender's approval of any certification given to Lender nor relieve Borrower of any of Borrower's obligations. 38. ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED. Borrower covenants and agrees to permit or suffer none of the following without the prior written consent of Lender: (a) Any structural alteration of, or addition to, the Improvements now or hereafter situated upon the Real Property, or the addition of any new buildings or other structure(s) thereto, other than the erection or removal of non-load bearing interior walls or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect; or (b) The removal, transfer, sale or lease of the Property, except that the removal, replacement or substitution of fixtures, equipment, machinery, apparatus and articles of personal property (replacement or substituted items must be of like or better quality than the removed items in their original condition) encumbered hereby may be made in the normal course of business; or (c) The use of any of the Improvements now or hereafter situated on the Real Property for any purpose other than the Existing Use and related facilities, or as may be permitted under the Borders Lease, so long as the Borders Lease remains in effect. Omaha, Nebraska 39 39. FUTURE ADVANCES SECURED. This Mortgage shall secure not only existing indebtedness, but also future advances, whether such advances are obligatory or to be made at the option of Lender. Upon the request of Borrower, and at Lender's option prior to release of this Mortgage, Lender may make future advances to Borrower. All future advances with interest thereon shall be secured by this Mortgage to the same extent as if such future advances were made on the date of the execution of this Mortgage unless the parties shall agree otherwise in writing, but the total secured indebtedness shall not exceed at any one time a maximum principal amount equal to double the face amount of the Note plus interest and costs of collection, including court costs and Reasonable Attorneys' Fees. Any advances or disbursements made for the benefit or protection of or the payment of taxes, assessments, levies or insurance upon the Property, with interest on such disbursements as provided herein, shall be added to the principal balance of the Note and collected as a part thereof. To the extent that this Mortgage may secure more than one note, a default in the payment of any such mortgage note shall constitute a default in the payment of all such notes. 40. EFFECT OF SECURITY AGREEMENT. Borrower agrees to, and shall upon the request of Lender, execute and deliver to Lender, in form and content satisfactory to Lender, such financing statements, descriptions of property and such further assurances as Lender, in Lender's sole discretion, may from time to time consider necessary to create, perfect, continue and preserve the lien and encumbrances hereof, and the security interest granted herein, upon and in the Property. Without the prior written consent of Lender, Borrower shall not create or suffer to be created, pursuant to the UCC, any other security interest in such real and personal property and fixtures described herein. Upon the occurrence of a default hereunder or Borrower's breach of any other covenants or agreements between the parties entered into in conjunction herewith, Lender shall have the remedies of a secured party under the UCC as provided in Section 25, and at Lender's option, the remedies provided for in this Mortgage and the other Loan Documents. Lender, at the expense of Borrower, may cause such statements, descriptions and assurances, as herein provided in this Section 40, and this Mortgage, to be recorded and re-recorded, filed and refiled, at such times and in such places as may be required or permitted by law to so create, perfect and preserve the lien and encumbrance hereof upon all of the Property. 41. TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions of the Application for Mortgage Loan dated August 28, 2003, and any subsequent amendments thereto (the "APPLICATION"), executed by and between Borrower and Lender, are incorporated herein by reference. All terms, covenants, conditions and agreements of the Application not expressly set forth in this Mortgage and any of the other Loan Documents shall survive the execution and delivery hereof, and remain in full force and effect. In the event any conflict exists between the terms, covenants, conditions and agreements of the Application and the Loan Documents, the terms, covenants, conditions and agreements of the Loan Documents shall prevail. Omaha, Nebraska 40 42. SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof shall be binding upon Borrower and the heirs, personal representatives, trustees, successors and assigns of Borrower, and shall inure to the benefit of Lender, its successors and assigns. Where more than one Borrower is named herein, the obligations and liabilities of said Borrower shall be joint and several. Wherever used in this Mortgage, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein: (a) the word "Borrower" shall mean Borrower and/or any subsequent owner or owners of the Property; (b) the word "Lender" shall mean Lender or any subsequent holder or holders of this Mortgage; (c) the word "Trustee" shall mean Trustee or any successor Trustee under this Mortgage; (d) the word "Note" shall mean the Note(s) secured by this Mortgage; and (e) the word "person" shall mean an individual, trustee, trust, corporation, partnership, limited liability corporation, limited liability partnership, joint venture or unincorporated association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean fees charged by attorneys selected by Lender based upon such attorneys' then prevailing hourly rates as opposed to any statutory presumption specified by any statute then in effect in the State. As used herein words of any gender shall include all other genders. 43. NOTICES. All notices, reports, requests or other written instruments required or permitted hereunder, shall be in writing, signed by the party giving or making the same, and shall be sent hand-delivered, effective upon receipt, sent by United States Express Mail or by a nationally recognized overnight courier, effective upon receipt, or sent by United States registered or certified mail, postage prepaid, with return receipt requested, deemed effective on the earlier of the day of actual delivery as shown by the addressee's return receipt or the expiration of three business days after the date of mailing, addressed to the party intended to receive the same at the address set forth below or at such other address as shall be given in writing by any party to another ("WRITTEN NOTICE"): If to Borrower: OMAHA STORE NO. 166 L.L.C. 31850 Northwestern Highway Farmington Hills, Michigan 48334 Attention: Mr. Richard Agree If to Lender: NATIONWIDE LIFE INSURANCE COMPANY One Nationwide Plaza Columbus, Ohio 43215-2220 Attention: Real Estate Investment Department, 34T 44. GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. BORROWER AND LENDER, EACH TO THE FULLEST EXTENT Omaha, Nebraska 41 PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM WHICH ANY PARTY MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, BORROWER WAIVES ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Mortgage and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the internal laws of the State, without regard to principles of conflicts of laws. The parties hereto irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Mortgage may be brought in a court of record in the State or in the courts of the United States of America located in such State, (b) consent to the non-exclusive jurisdiction of each such court in any suit, action or proceeding, and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. If any clauses or provisions herein contained operate, or would prospectively operate, to invalidate this Mortgage, then such clauses or provisions only shall be held for naught, as though not herein contained, and the remainder of this Mortgage shall remain operative and in full force and effect. 45. RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising under the terms, covenants, conditions and agreements contained in this Mortgage shall be separate, distinct and cumulative, and none of them shall be in exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provisions, anything herein or otherwise to the contrary notwithstanding. If Borrower is comprised of more than one person or entity, then the liability of each such person and entity hereunder shall be joint and several. Omaha, Nebraska 42 46. MODIFICATIONS. This Mortgage cannot be changed, altered, amended or modified except by an agreement in writing and in recordable form, executed by both Borrower and Lender. 47. EXCULPATION. Notwithstanding anything contained herein to the contrary, the liability of Borrower is subject to the limited recourse provisions contained in the Exculpation section of the Note, which are incorporated herein and made a part hereof by reference as if fully set forth herein. 48. FULL RECOURSE. Notwithstanding any provisions in this Mortgage to the contrary, including without limitation the provisions set forth in the section captioned "Exculpation" hereinabove, Borrower shall be personally liable, jointly and severally, for the entire Loan secured by this Mortgage (including all principal, interest and other charges) in the event (a) Borrower violates the covenant governing the placing of subordinate financing on the Property as set forth in this Mortgage; (b) Borrower violates the covenant restricting transfers of interests in the Property or transfers of ownership interests in Borrower as set forth in this Mortgage; or (c) Borrower or any guarantor violates the provisions of Section 22 of this Mortgage, or there is filed against Borrower or any guarantor or indemnitor of the Loan, a petition in bankruptcy or for the appointment of a receiver, or there commences under any bankruptcy or insolvency law, proceedings for Borrower's relief, or for the compromise, extension, arrangement or adjustment of Borrower's obligations which is not dismissed within thirty (30) days after the filing of same. 49. LENDER IS NOT A JOINT VENTURER OR PARTNER. Borrower and Lender acknowledge and agree that in no event shall Lender be deemed to be a partner or joint venturer with Borrower or any member of Borrower. Without limitation of the foregoing, Lender shall not be deemed to be a partner or joint venturer on account of its becoming a mortgagee in possession or exercising any rights pursuant to this Mortgage or pursuant to any other instrument or document evidencing or securing any of the indebtedness secured hereby, or otherwise. 50. CAPTIONS. The captions set forth at the beginning of the various Sections of this Mortgage are for convenience only, and shall not be used to interpret or construe the provisions of this Mortgage. 51. SPLITTING OF MORTGAGE. This Mortgage and the Note shall, at any time until the same shall be fully paid and satisfied, at the sole election of Lender, be split or divided into two or more notes and two or more security instruments, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Borrower, upon written request of Lender, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Lender and/or its designee or designees substitute notes and security instruments in such principal amounts, Omaha, Nebraska 43 aggregating not more than the then unpaid principal amount of Loan, and containing terms, provisions and clauses similar to those contained herein and in the Note, and such other documents and instruments as may be required by Lender. 52. REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, Borrower, at its expense, will issue, in lieu thereof, a replacement Note or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor. 53. SOLE DISCRETION OF LENDER. Wherever pursuant to this Mortgage Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 54. TRANSFER OF LOAN. (a) Lender may, at any time, sell, transfer or assign the Note, this Mortgage, the Assignment and the other Loan Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "SECURITIES"), or otherwise sell the Loan or an interest therein (a "SECONDARY MARKET TRANSACTION"). Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor in such Securities or in connection with a Secondary Market Transaction or any Rating Agency rating such Securities (collectively, the "INVESTOR") and each prospective Investor, all documents and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, any Guarantor and the Property, whether furnished by Borrower, any Guarantor or otherwise, as Lender determines necessary or desirable. Borrower acknowledges that certain information regarding the Loan and the parties thereto and the Property may be included in a private placement memorandum, prospectus or other disclosure documents. The term "RATING AGENCY" shall mean each statistical rating agency that has assigned a rating to the Securities. (b) Borrower shall cooperate in good faith with Lender in effecting any such Secondary Market Transaction and shall cooperate in good faith to implement all requirements reasonably imposed by the participants involved in any Secondary Market Transaction (including without limitation, a Rating Agency and/or an Investor) including, without limitation, all structural or other changes to the Loan, modifications to any documents Omaha, Nebraska 44 evidencing or securing the Loan, delivery of opinions of counsel acceptable to the Rating Agency or such Investors and addressing such matters as the Rating Agency or such Investors may require; provided, however, that the Borrower shall not be required to modify any documents evidencing or securing the Loan which would modify (i) the interest rate payable under the Note, (ii) the stated maturity of the Note, (iii) the amortization of principal of the Note, or (iv) any other material terms or covenants of the Loan. (c) If Securities are issued in connection with the Loan or a Secondary Market Transaction occurs with respect to the Loan, all Funds held by Lender in escrow or pursuant to reserves in accordance with the Loan Documents shall be deposited in "eligible accounts" at "eligible institutions" and invested in "permitted investments" as then defined and required by any Rating Agency. 55. COUNTERPARTS. This Mortgage may be executed in several counterparts each of which when executed and delivered is an original, but all of which together shall constitute one instrument. 56. SPECIAL STATE OF NEBRASKA PROVISIONS In the event of any inconsistencies between the terms and conditions of this Article 56 and the other provisions of this Mortgage, the terms of this Article 56 shall control and be binding. (a) APPOINTMENT OF SUCCESSOR TRUSTEE. Lender may, from time to time, by a written instrument executed and acknowledged by Lender, mailed to Borrower and recorded in the county in which the Real Property is located and by otherwise complying with the provisions of the applicable law of the State of Nebraska, substitute a successor or successors to the Trustee named herein or acting hereunder. (b) REQUESTS FOR NOTICE. Borrower hereby requests a copy of any Notice of Default and any Notice of Sale hereunder be mailed to Borrower at Borrower's address set forth in the Section 43 of this Mortgage. While hereby expressly reserving the priority of this Mortgage as established by law, Trustee and Lender hereunder request that a copy of any Notice of Default and any Notice of Sale under any deed of trust recorded against the Property either prior to, or subsequent to the date this Mortgage is recorded be mailed to each at the addresses set forth in Section 43 of this Mortgage. (c) FORECLOSURE BY POWER OF SALE. Should Lender elect to foreclose by exercise of the Power of Sale herein contained, Lender shall notify Trustee and shall deposit with Trustee this Mortgage and the Note and such receipts and evidence of expenditures made and secured hereby as Trustee may require. Thereafter, and only in accordance with or as permitted by the Nebraska Trust Deeds Act: Omaha, Nebraska 45 (1) upon receipt of such notice from Lender, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Notice of Sale and any other notice or document or instrument as then required by law and/or by this Deed of Trust. Trustee shall, without demand on Borrower, after such time as may then be required by law and after recordation and/or delivery of such Notice of Default, Notice of Sale and/or any other notice required by law, sell the Property at the time and place of sale fixed by it in such 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 Trustee 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 a good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. Any person, including, without limitation, Lender (but specifically excluding the Borrower), may purchase at such sale, and Borrower hereby covenants to warrant and defend the title of such purchaser or purchasers; and (2) after deducting all costs, fees and expenses of Trustee and those allowed or permitted by the Loan Documents, including attorneys fees and costs of evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of (i) all sums expended under the terms hereof, not then repaid, (ii) all other sums then secured hereby, and (iii) the remainder, if any, to the person or persons legally entitled thereto; and (3) Trustee may in the manner provided by law postpone sale of all or any portion of the Property. (d) RECONVEYANCE BY TRUSTEE. Upon written request of Lender stating that all sums secured hereby have been paid, Trustee shall reconvey to Borrower, or to the person or persons legally entitled thereto, without warranty, any portion of the Property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Omaha, Nebraska 46 IN WITNESS WHEREOF, Borrower has caused this Mortgage to be executed as of the day and year first above written. BORROWER: OMAHA STORE NO. 166 L.L.C., a Delaware limited liability company By: AGREE LIMITED PARTNERSHIP, a Delaware limited partnership Its Member By: AGREE REALTY CORPORATION, a Maryland corporation Its General Partner By: /s/ Richard Agree -------------------- Richard Agree President STATE OF ) ) COUNTY OF ) The foregoing instrument was acknowledged before me this _____ day of October, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a Maryland corporation, on behalf of the corporation as general partner of Agree Limited Partnership, a Delaware partnership, as member of Omaha Store No. 166 L.L.C., a Delaware limited liability company. ------------------------------------------ Name: ------------------------------------ Notary Public My Commission Expires: ------------------- (SEAL) Omaha, Nebraska S-1 EXHIBIT A (Legal Description) Lot 2, Cedarnole Replat 1, an addition to the City of Omaha, as surveyed, platted and recorded in Douglas County, Nebraska; and Lot 1, Cedarnole Replat 2, an addition to the City of Omaha, as surveyed, platted and recorded in Douglas County, Nebraska. Omaha, Nebraska A - 1 EX-14.1 7 k82459exv14w1.txt CEO AND CFO CODE OF ETHICS EXHIBIT 14.1 CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER CODE OF PROFESSIONAL ETHIC December 15, 2003 Preface The Chief Executive Officer and the Chief Financial Officer (the "Officers") hold important and elevated roles in corporate governance. The Officers are vested with both the responsibility and authority to protect, balance and preserve the interests of all of the Company's stakeholders, including shareholders, clients, employees, suppliers and citizens of the communities in which business is conducted. The Officers fulfill this responsibility by prescribing and enforcing the polices and procedures employed in the operation of the Company's financial organization, and by demonstrating the following: I. HONEST AND ETHICAL CONDUCT The Officers will exhibit and promote the highest standards of honest and ethical conduct through the establishment and operation of policies and procedures that: - Encourage and reward professional integrity in all aspects of the financial organization, by eliminating inhibitions and barriers to responsible behavior, such as coercion, fear of reprisal, or alienation from the financial organization or the Company itself. - Prohibit and eliminate the appearance or occurrence of conflicts between what is in the best interest of the Company and what could result in material personal gain for the Officers. - Provide a mechanism for members of the finance organization to inform management of deviations in practice from policies and procedures governing honest and ethical behavior. - Demonstrate their personal support for such policies and procedures through periodic communication reinforcing these ethical standards throughout the organization. II. FINANCIAL RECORDS AND PERIODIC REPORTS Senior Officers will establish and manage the Company's transaction and reporting systems and procedures to ensure that: - Business transactions are properly authorized and completely and accurately recorded on the Company's books and records in accordance with Generally Accepted Accounting Procedures ("GAAP") and established Company financial policy. - The retention or proper disposal of Company records shall be in accordance with established Company financial polices and applicable legal and regulatory requirements. - Periodic financial communications and reports will be delivered in a manner that facilitates the highest degree of clarity of content and meaning so that readers and users will quickly and accurately determine their significance and consequence. III. COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS The Officers will establish and maintain mechanisms to: - Educate members of the Company about any federal, state or local statute, regulation or administrative procedure that affects the operation of the finance organization and the Company generally. - Monitor the compliance of the finance organization with any applicable federal, state or local statute, regulation or administrative rule. - Identify, report and correct in a swift and certain manner, any detected deviations from applicable federal, state or local statute or regulation. Accepted and acknowledged: /s/ Richard Agree ------------------------- Richard Agree /s/ Kenneth R. Howe ------------------------- Kenneth R. Howe EX-21.1 8 k82459exv21w1.txt SUBSIDIARIES EXHIBIT 21.1 AGREE REALTY CORPORATION SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 2003 Agree Realty Corporation; through its Operating Partnership, Agree Limited Partnership, is the sole member of the following Limited Liability Companies: SUBSIDIARY JURISDICTION OF ORGANIZATION Agree -- Columbia Crossing Project, L.L.C. Delaware Agree -- Milestone Center Project, L.L.C. Delaware Agree Facility No. 1, L.L.C. Delaware Tulsa Store No. 264, L.L.C. Delaware Mt Pleasant Shopping Center L.L.C. Michigan ALPSC Associates, LLC South Carolina Oklahoma City Store No. 151, L.L.C. Delaware Omaha Store No. 166, L.L.C. Delaware Indianapolis Store No. 16, L.L.C. Delaware AMCP Germantown LLC Delaware ACCP Maryland LLC Delaware Agree Realty Corporation, through its Operating Partnership, Agree Limited Partnership, owns a 99% interest in the following Limited Liability Company: Lawrence Store No. 203, L.L.C. Delaware EX-23 9 k82459exv23.txt CONSENT OF BDO SIEDMAN, LLP EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Agree Realty Corporation Farmington Hills, Michigan We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-21293) of Agree Realty Corporation of our report dated February 13, 2004 relating to the consolidated financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 13, 2004 relating to the financial statement schedule, which appears in this Form 10-K. BDO Seidman, LLP Troy, Michigan March 10, 2004 EX-31.1 10 k82459exv31w1.txt CERTIFICATION OF RICHARD AGREE, CEO EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard Agree, certify that: 1. I have reviewed this annual report on Form 10-K of Agree Realty Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 12, 2004 /s/ Richard Agree --------------------- ----------------- Name: Richard Agree Title: President and Chief Executive Officer EX-31.2 11 k82459exv31w2.txt CERTIFICATION OF KENNETH HOWE, CFO EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Kenneth R. Howe, certify that: 1. I have reviewed this annual report on Form 10-K of Agree Realty Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 12, 2004 /s/ Kenneth R. Howe - --------------------------- ------------------- Name: Kenneth R. Howe Title: Vice President, Finance EX-32.1 12 k82459exv32w1.txt CERTIFICATION OF RICHARD AGREE, CEO EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Agree Realty Corporation (the "Company") on Form 10-K for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard Agree, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairy presents, in all material respects, the financial condition and results of operations of the Company. /s/ RICHARD AGREE - ----------------------- Richard Agree Chief Executive Officer March 12, 2004 EX-32.2 13 k82459exv32w2.txt CERTIFICATION OF KENNETH HOWE, CFO EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Agree Realty Corporation (the "Company") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kenneth R. Howe, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairy presents, in all material respects, the financial condition and results of operations of the Company. /s/ KENNETH R. HOWE - ----------------------- Kenneth R. Howe Chief Financial Officer March 12, 2004 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.33

                                                                   EXHIBIT 10.33
Recorded at the Request of and
When Recorded Return to:

Pepe & Hazard LLP                                                NOT SUBJECT TO
225 Asylum Street - 22nd Floor                                   RECORDATION TAX
Hartford, CT  06103-4302
Attention:  Adam F. Zweifler, Esq.

                MAXIMUM PRINCIPAL AMOUNT SECURED IS $3,520,000.00
                  GRANTOR NOT PRIMARILY LIABLE FOR DEBT SECURED

                 INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT

         This INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT (the "DEED OF
TRUST") is dated as of the 31st day of October, 2003, by AGREE - COLUMBIA
CROSSING PROJECT, L.L.C., a Delaware limited liability company ("GRANTOR"),
having its principal office at 31850 Northwestern Highway, Farmington Hills,
Michigan 48334 to and in favor of JON M. LARIA AND ANNE HEESTERS SCHROTH, having
an address c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street,
18th Floor, Baltimore, Maryland 21202 (collectively, the "TRUSTEE"), as trustee
for NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its successors and
assigns ("LENDER"), having its principal office at One Nationwide Plaza,
Columbus, Ohio 43215-2220, Attention: Real Estate Investment Department, 34T, or
at such other place as Lender may from time to time designate.

                              W I T N E S S E T H:

         WHEREAS, Lender has made four loans of even date herewith in the
aggregate total original principal amount of Fifteen Million Dollars
($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the
following loans of even date herewith: a loan from Lender to ACCP Maryland LLC,
a Delaware limited liability company (the "BORROWER"), in the original principal
amount of $3,520,000.00 (this "LOAN"); a loan to AMCP Germantown LLC, a Delaware
limited liability company ("AGREE-MILESTONE"), in the original principal amount
of $3,310,000.00 (the "AGREE-MILESTONE LOAN"); a loan to Omaha Store No. 166
L.L.C., a Delaware limited liability company ("OMAHA") in the original principal
amount of $3,910,000.00 (the "OMAHA LOAN"); and a loan to Oklahoma City Store
No. 151 L.L.C., a Delaware limited liability company ("OKLAHOMA CITY"), in the
original principal amount of $4,260,000.00 (the "OKLAHOMA CITY LOAN").
Agree-Milestone, Omaha and Oklahoma City are hereinafter referred to
collectively as the "AFFILIATED BORROWERS". The

                                                              Columbia, Maryland



Agree-Milestone Loan, the Omaha Loan and the Oklahoma City Loan are hereinafter
referred to generically as an "AFFILIATE LOAN" and collectively as the
"AFFILIATE LOANS";

         WHEREAS, the Borrower is justly indebted to Lender under the Loan in
the original principal sum of Three Million Five Hundred Twenty Thousand and
00/100 Dollars ($3,520,000.00), with interest thereon, which Loan is evidenced
and represented by that certain Note of even date herewith (which Note, as the
same may be extended, renewed, replaced, amended, restated or otherwise
modified, are hereinafter referred to as the "NOTE"), both principal and
interest being payable as therein provided, with the first payment on the Note
becoming due and payable on the date of disbursement; and

         WHEREAS, Grantor has guaranteed to Lender the payment and performance
of Borrower's obligations under the Note pursuant to a Guaranty Agreement of
even date herewith by Grantor (which Guaranty Agreement, as the same may be
extended, renewed, replaced, amended, restated or otherwise modified, is
hereinafter referred to as the "GRANTOR'S GUARANTY"). The terms, covenants and
conditions of the Grantor's Guaranty are hereby specifically incorporated in
this Deed of Trust by reference; and

         WHEREAS, Lender, as a condition precedent to the extension of credit
and the making of the Loan, evidenced by the Note and guaranteed by the
Grantor's Guaranty, has required that Grantor provide Lender with security for
the repayment of the Loan as well as for the performance, observance and
discharge by Grantor of various terms, covenants, conditions and agreements made
by Grantor to, with, in favor of and for the benefit of Lender with respect to
the Loan and such security;

         WHEREAS, (i) the Grantor's obligations under the Grantor's Guaranty
represent a contingent liability that does not mature until there has been an
uncured default by Borrower under the Loan Documents, (ii) Grantor and Borrower
are separate and distinct entities, and (iii) Grantor is not primarily liable
for the obligations of Borrower under the Loan Documents.

         NOW THEREFORE, in consideration of and in order to secure the repayment
of the amounts due under the Grantor's Guaranty, together with interest thereon,
as well as the payment of all other sums of money secured hereby, as hereinafter
provided; to secure the observance, performance and discharge by Grantor of all
terms, covenants, conditions and agreements set forth in the Grantor's Guaranty,
this Deed of Trust, and in all other documents and instruments executed and
delivered by Grantor to and in favor of Lender for the purpose of further
securing the repayment of the Grantor's Guaranty; in order to charge the
properties, interests and rights hereinafter described with such payment,
observance, performance and discharge; and in consideration of the sum of one
dollar paid by Lender to Grantor, and other good and valuable considerations,
the receipt and sufficiency of which are hereby acknowledged by Grantor, Grantor
does hereby grant, bargain, sell, convey, assign, transfer, pledge, deliver,
hypothecate, warrant and confirm unto Lender forever, all of

                                                              Columbia, Maryland

                                       2



Grantor's right, title and interest in and to the following described
properties, including all rights, interests, replacements, substitutions and
additions thereto, therein or therefore (collectively, the "DEED OF TRUST
PROPERTY"):

         (i)   All that certain piece, parcel or tract of land or real
property of which Grantor is now seized and in actual or constructive
possession, situated in the City of Columbia, County of Howard, and State of
Maryland (the "STATE"), and being more particularly described on EXHIBIT A
attached hereto and by this reference made a part hereof (the "REAL PROPERTY");

         (ii)  All buildings, structures and other improvements of any kind,
nature or description now or hereafter erected, constructed, placed or located
upon the Real Property (the "IMPROVEMENTS"), including, without limitation, any
and all additions to, substitutions for or replacements of such Improvements;

         (iii)  All minerals, royalties, gas rights, water, water rights, water
stock, flowers, shrubs, lawn plants, crops, trees, timber and other emblements
now or hereafter located on, under or above all or any part of the Real
Property;

         (iv)  All and singular, the tenements, hereditaments, strips and gores,
rights-of-way, easements, privileges, profits and other appurtenances now or
hereafter belonging or in any way appertaining to the Real Property, including,
without limitation, all right, title and interest of the Grantor in any
after-acquired right, title, interest, remainder or reversion in and to the beds
of any ways, streets, avenues, roads, alleys, passages and public places, open
or proposed, in front of, running through, adjoining or adjacent to the Real
Property (the "APPURTENANCES");

         (v)  Any and all leases, licenses, contracts, rents, license fees,
royalties, issues, revenues, profits, proceeds, deposits, income and other
benefits, including accounts receivable, termination fees, of, accruing to or
derived from the Real Property, Improvements and Appurtenances, and any business
or enterprise presently situated or hereafter operated thereon and therewith and
all of Grantor's right, title and interest under any and all lease guaranties,
letters of credit, and any other credit support furnished to Grantor in
connection with any of the foregoing (the "RENTS");

         (vi)  Any and all awards, payments or settlements, including interest
thereon, and the right to receive the same, as a result of: (a) the exercise of
the right of eminent domain; (b) the alteration of the grade of any way, street,
avenue, road, alley, passage or public place; (c) any other injury, damage,
casualty or claim relating to the taking of, or decrease in the value of, the
Real Property, Improvements or Appurtenances; or (d) proceeds of insurance
awards, to the extent of all amounts which may be secured by this Deed of Trust
at the date of any such award or payment including but not limited to Reasonable
Attorneys' Fees (as hereinafter

                                                              Columbia, Maryland

                                       3



defined), costs and disbursements incurred by Lender in connection with the
collection of such award or payment;

         (vii)  All fixtures, materials, equipment, machinery, apparatus,
appliances, and other property whatsoever now or hereafter attached to,
installed in, or used in connection with the buildings and other improvements
now erected or hereafter to be erected on said land, including, but not limited
to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators,
air-conditioning and sprinkler systems, gas and electric fixtures, carpets,
rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all
other furnishings, tools, equipment and machinery, appliances, building
supplies, materials, and all fixtures, accessions and appurtenances thereto, and
all renewals or replacements of or substitutions for any of the foregoing, all
of which property and things are hereby declared to be permanent fixtures and
accessions to the freehold and part of the realty conveyed herein as security
for the indebtedness herein mentioned; and

         (viii)  All agreements or contracts relating to any interest rate cap
agreements, swaps or other interest hedging agreements;

         TO HAVE AND TO HOLD the foregoing Deed of Trust Property and the rights
hereby granted for its use and benefit unto Lender, Trustees and its successors
and assigns in fee simple forever, successors in interest of Trustees, in trust,
in fee simple forever;

         FIRST: Until any default in payment of any matter of indebtedness
hereby secured as herein provided for, or until breach of any of the covenants,
agreements, terms or conditions herein contained, to permit Grantor, its
successors and assigns, to possess and enjoy said Property and to receive the
rents, issues and profits thereof; and on full payment of the Note, the
Grantor's Guaranty, and of any extensions or renewals thereof, and interest
thereon, and all sums advanced or expended as herein provided, and all other
proper costs, charges, expenses, commissions, at any time before the sale
hereinafter provided for, to release and reconvey unto and at the cost of
Grantor, or the party or parties then claiming under Grantor, the aforesaid
Property.

         SECOND: Upon any default being made in payment under the Grantor's
Guaranty or any installment of principal, interest or either, due thereunder, or
any renewal or extension thereof, or this Deed of Trust; or upon any default in
the performance of any of the covenants, conditions or agreements herein or in
the Grantor's Guaranty contained; then upon any such default so made as
aforesaid:

         The Grantor, in accordance with the Maryland Rules of Procedure or any
Public General Law or Public Local Law of the State of Maryland relating to
deeds of trust or mortgages, including any supplements, amendments or additions
thereto, does hereby assent to

                                                              Columbia, Maryland

                                       4



the passage of a decree by the Circuit Court for Howard County, as may be
required by applicable law; or

         The Trustees or substitute Trustees shall have the power and, upon the
direction of the Lender, the duty to sell and in the event of default by any
purchaser, to re-sell the herein described Property.

         Upon any such sale, whether made under the assent to the passing of a
decree or under the power of sale, the party selling may sell the Property as a
whole or in such parcel or parcels, manner or order, as such party selling may,
in its sole discretion, elect; such sale may also be at the sole discretion of
the party selling subject to any one or more existing tenancies. Such sale shall
be at public auction at such time and place, upon such terms and conditions, and
after such previous public notice (in compliance with the Maryland Rules of
Procedure and any other applicable law) as Trustees, or substitute Trustees,
shall deem best for the interest of all parties concerned, and (the terms of the
sale being complied with), Trustees shall convey to the purchaser or purchasers
at the cost of such purchaser or purchasers, the Property so sold, such
purchaser or purchasers being hereby discharged from all liability for the
application of the purchase money; and shall apply the proceeds of sale (after
paying from the proceeds all expenses of sale of every kind and nature
whatsoever, including, without limitation, reasonable attorneys' fees, all taxes
and assessments thereon due, all insurance premiums and fees for guard or
watchmen services, all utility charges of whatsoever nature whether or not
listed on the real property tax bill, all sums advanced as herein provided, and
a trustees' commission equal to the commission allowed trustees for making sales
of property under decrees of the equity courts having jurisdiction), to the
payment of the indebtedness due and outstanding under the Grantor's Guaranty
whether matured or not, and the interest thereon, to date of payment from
purchaser, paying over the surplus, if any, to Grantor, its successors or
assigns, upon the surrender and delivery to the purchaser or to the heirs,
personal representatives, successors or assigns of purchaser, of the possession
of the Property so sold and conveyed, less the expense, if any, of obtaining
possession thereof. Half of such commissions and all such expenses and costs
shall be paid by Grantor, its heirs, successors or assigns in the event that the
debt evidenced by the Note shall be paid after any advertisement of the
Property, but before sale thereof. The Trustees may act hereunder and may sell
and convey said Property under power granted above although the Trustees have
been, may now be or may hereafter be attorneys or agents of the Lender. In the
event that the purchaser at such sale or resale shall be the then holder of the
Note, the Grantor's Guaranty which is entitled to receive the proceeds of such
sale, then the person responsible for conducting the sale shall accept on
account of the purchase price, without requiring the actual payment of money,
the written receipt of such purchaser for up to the amount of proceeds to which
such purchaser is entitled, except such sums as are necessary to pay the
above-mentioned expenses of sale. The holder of the Note, the Grantor's
Guaranty, as purchaser, need not tender cash or the equivalent thereof as a
required deposit in connection with any such sale.

                                                              Columbia, Maryland

                                       5



         Grantor, in addition, agrees that Lender, may in the event of default,
proceed under the Uniform Commercial Code as presently contained in the
Commercial Law Article of the Annotated Code of Maryland, and any and all
amendments, additions and supplements thereto as to all or any part of the
chattels, personal property, equipment and fixtures included in the Property
described aforesaid and Grantor agrees that the Trustees shall have and may
exercise with respect to all such chattels, personal property, equipment and
fixtures aforesaid, all the rights, remedies and powers of a secured party under
the Uniform Commercial Code including, without limitation, the right and power
to replevy, sell or otherwise dispose of, foreclose upon, lease or utilize all
or any part of such chattels, personal property, equipment and fixtures
aforesaid in any manner authorized or permitted under said Uniform Commercial
Code.

         In order to secure the repayment of the Loan guaranteed by the
Grantor's Guaranty, together with interest on the Loan, as well as the payment
of all other sums of money secured hereby, as hereinafter provided; and to
secure the observance, performance and discharge by Grantor of all covenants,
conditions and agreements set forth in the Grantor's Guaranty, this Deed of
Trust and in the other documents and instruments executed and delivered by
Grantor to and in favor of Lender for the purpose of further securing the
repayment of the Loan guaranteed by the Grantor's Guaranty; and in order to
charge the properties, interests and rights hereinafter described with such
payment, observance, performance and discharge; and in consideration of the sum
of Ten Dollars ($10.00) paid by Lender and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
Grantor hereby grants Trustees, their successors and assigns, a security
interest in all Fixtures, Goods (including, without limitation, Consumer Goods,
Inventory, Equipment and Farm Products), Accounts, Chattel Paper (including,
without limitation, Electronic Chattel Paper and Tangible Chattel Paper),
Instruments, General Intangibles (including, without limitation, Payment
Intangibles and Software), Letters of Credit, Letter-of-Credit Rights,
Documents, As-Extracted Collateral, Money and Deposit Accounts of every kind,
and all proceeds thereof, including, without limitation, any and all licenses,
permits, franchises, trademarks, trade names, service marks or logos, plans,
specifications, maps, construction contracts, instruments, insurance policies,
fittings and fixtures of every kind, which is, are or shall hereafter be located
upon, attached, affixed to or used or useful, either directly or indirectly, in
connection with the complete and comfortable use, occupancy and operation of the
Real Property, Improvements or Appurtenances as a retail project (the "EXISTING
USE"), or any other business, enterprise or operation as may hereafter be
conducted upon or with said Real Property, Improvements or Appurtenances,
including, without limitation, any and all licenses, permits or franchises, used
or required in connection with such use, occupancy or operation as well as the
proceeds thereof or therefrom regardless of form, all security deposits and
advance rentals under lease agreements now or at any time hereafter covering or
affecting any of the Property and held by or for the benefit of Grantor, all
monetary deposits which Grantor has been required to give to any public or
private utility with respect to utility services furnished to the Real Property
or Improvements, all rents, issues and profits from leases of all or any part of
the Real Property

                                                              Columbia, Maryland

                                       6



or Improvements, all proceeds (including premium refunds) of each policy of
insurance relating to the Real Property or Improvements, all proceeds from the
taking of the Real Property or Improvements or any part thereof or any interest
therein or right or estate appurtenant thereto by eminent domain or by purchase
in lieu thereof, all amounts deposited in escrow for the payment of ad valorem
taxes, assessments, charges, ground rentals and/or premiums for policies of
insurance with respect to the Real Property or Improvements, all proceeds and
other amounts paid or owing to Grantor under or pursuant to any and all
contracts and bonds relating to the construction, erection or renovation of the
Real Property or Improvements, all oil, gas and other hydrocarbons and other
minerals produced from or allocated to the Real Property and all products
processed or obtained therefrom, the proceeds thereof, and all accounts and
general intangibles under which such proceeds may arise, together with any sums
of money that may now or at any time hereafter become due and payable to Grantor
by virtue of any and all royalties, overriding royalties, bonuses, delay rentals
and any other amount of any kind or character arising under any and all present
and future oil, gas and mining leases covering the Real Property or any part
thereof (collectively, the "FIXTURES AND PERSONAL PROPERTY," which term
expressly excludes any toxic waste or substance deemed hazardous under federal,
regional, state or local laws, codes, ordinances, statutes, rules, regulations,
decisions or orders). The Deed of Trust Property and the Fixtures and Personal
Property are herein together referred to as the "PROPERTY".

         Except as otherwise expressly provided in this Deed of Trust, all terms
in this Deed of Trust relating to the Property and the grant of the foregoing
security interest which are defined in the Uniform Commercial Code of the State
(the "UCC") shall have the meanings assigned to them in Article 9 (or, absent
definition in Article 9, in any other Article) of the UCC, as those meanings may
be amended, revised or replaced from time to time. Notwithstanding the
foregoing, the parties intend that the terms used herein which are defined in
the UCC have, at all times, the broadest and most inclusive meanings possible.
Accordingly, if the UCC shall in the future be amended or held by a court to
define any term used herein more broadly or inclusively than the UCC in effect
on the date of this Deed of Trust, then such term, as used herein, shall be
given such broadened meaning. If the UCC shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the UCC in effect on the date of this Deed of Trust, such amendment or
holding shall be disregarded in defining terms used in this Deed of Trust.

         Grantor hereby covenants and warrants with and to Lender that Grantor
is indefeasibly seized of the Property and has good right, full power, and
lawful authority to convey and encumber all of the same as aforesaid; that
Grantor hereby fully warrants the title to the Property and will defend the same
and the validity and priority of the lien and encumbrance of this Deed of Trust
against the lawful claims of all persons whomsoever; and Grantor further
warrants that the Property is free and clear of all liens and encumbrances of
any kind, nature or description, save and except only (with respect to said Real
Property, Improvements and Appurtenances) for real property taxes for years
subsequent to 2004 (which are not yet due and

                                                              Columbia, Maryland

                                       7



payable) and those exceptions accepted by Lender as set forth in the title
insurance commitment or proforma policy issued to Lender precedent to the
issuance of a Lender's Policy of Title Insurance insuring the second lien
priority of this Deed of Trust (the "PERMITTED EXCEPTIONS").

         If Grantor shall pay to Lender the Loan guaranteed by the Grantor's
Guaranty and if Grantor shall duly, promptly and fully perform, discharge,
execute, effect, complete and comply with and abide by each and every one of the
terms, covenants, conditions and agreements of the Grantor's Guaranty, this Deed
of Trust, and all other Loan Documents, then this Deed of Trust and the estates
and interests hereby granted and created shall cease, terminate and be null and
void, and shall be discharged of record at the expense of Grantor.

         Grantor, for the benefit of Lender and its successors and assigns, does
hereby expressly covenant and agree as follows:

         1.       PERFORMANCE OF GUARANTY. Grantor shall fulfill all of its
obligations under the Grantor's Guaranty, together with all interest thereon, in
accordance with the terms, covenants and conditions of the Grantor's Guaranty
promptly at the times, at the place and in the manner that said principal and
interest shall become due under the Grantor's Guaranty, and shall promptly and
punctually pay all other sums required to be paid by Grantor pursuant to the
terms, covenants and conditions of the Grantor's Guaranty, this Deed of Trust,
the Indemnity Assignment of Leases, Rents and Profits of even date herewith
(which Indemnity Assignment of Leases, Rents and Profits, as the same may be
extended, renewed, replaced, amended, restated or otherwise modified, is
hereinafter referred to as the "ASSIGNMENT"), and all other documents and
instruments executed as further evidence of, as additional security for or
executed in connection with the Loan evidenced by the Note, guaranteed by the
Grantor's Guaranty and secured by this Deed of Trust (collectively, the "LOAN
DOCUMENTS").

         2.       PERFORMANCE OF OTHER OBLIGATIONS. Grantor shall perform,
comply with and abide by, and cause Borrower to perform, comply with and abide
by, each and every one of the terms, covenants, conditions and agreements
contained and set forth in the Note, the Grantor's Guaranty, this Deed of Trust,
and the other Loan Documents, shall comply with all Laws (hereafter defined) and
shall perform all of its obligations under any term, covenant, condition,
restriction or agreement of record affecting the Property, and to insure that at
all times the Property constitutes one or more legal lots capable of being
conveyed without violation of any subdivision or platting laws, codes,
ordinances, statutes, rules, regulations, or other laws relating to the
division, separation or subdivision of real property.

                                                              Columbia, Maryland

                                       8



         3.       PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY;
HAZARDOUS WASTE.

                  (a)      Grantor shall keep all Improvements now existing or
hereafter erected on the Real Property in good order and repair, only to be used
for the Existing Use, and not to do or permit any waste, impairment or
deterioration thereof or thereon, nor to alter, remove or demolish any of the
Improvements or any Fixtures and Personal Property attached or appertaining
thereto, without the prior written consent of Lender, nor to initiate, join in
or consent to any change in any private restrictive covenant, zoning ordinance
or other public or private restrictions limiting or defining the uses which may
be made of the Property or any part thereof, nor to do or permit any other act
whereby the Property shall become less valuable, be used for purposes contrary
to applicable Law or be used in any manner which will increase the premium for
or result in a termination or cancellation of the insurance policies hereinafter
required to be kept and maintained on the Property. In furtherance of, and not
by way of limitation upon, the foregoing covenant, Grantor shall effect such
repairs as Lender may reasonably require, and from time to time make all needful
and proper replacements so that the Improvements, Appurtenances, Fixtures and
Personal Property will, at all times, be in good condition, fit and proper for
the respective purposes for which they were originally erected or installed. In
connection with the making of such repairs, Grantor shall use contractors who
are properly licensed, who carry workers' compensation insurance and appropriate
liability insurance, who generally have a good reputation for completing their
work in a neat, prompt and workmanlike manner, and use only new or
re-manufactured goods of a quality as good or better than that originally used
on the Property. As provided herein, Grantor shall insure that no liens are
filed against the Property that relate in any way to the repair work provided
for herein. For so long as that certain Lease of the Property (the "BORDERS
LEASE") dated November 14, 2002 between Grantor, as landlord, and Border's,
Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with
Borders as the tenant thereunder and Grantor is diligently enforcing the
obligations of Borders thereunder, Grantor shall be deemed to be in compliance
with the requirements of this subparagraph.

         Grantor at all times shall keep the Property and ground water of the
Property free of Hazardous Materials (as hereinafter defined) to the extent
required by applicable governmental agencies and free of any liens arising in
connection therewith. Grantor shall not and shall not knowingly permit its
tenants or any third party requiring the consent of Grantor to enter the
Property, to use, generate, manufacture, treat, store, release, threaten
release, transport on or over, emit or dispose of Hazardous Materials in, on,
over, under or about the Property including the ground water of the Property in
violation of any federal, regional, state or local law, code, ordinance,
statute, rule, regulation, decision or order currently in existence or hereafter
enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Grantor shall give
Lender prompt Written Notice (as hereinafter defined) of any claim by any
person, entity, or governmental agency that a significant release or disposal of
Hazardous Materials has occurred in, on, over, under or about the Property,
including the ground water of the Property, in

                                                              Columbia, Maryland

                                       9



excess of those permitted by the Hazardous Waste Laws, whether caused by the
Grantor, any tenant or any third party. Grantor, through its professional
engineers and at Grantor's sole cost, shall promptly and thoroughly investigate
any suspected release of Hazardous Materials in, on, over, under or about the
Property, including the ground water of the Property. Grantor shall forthwith
remove, repair, remediate, clean up, and/or detoxify any Hazardous Materials
found in, on, over, under or about the Property or in the ground water of the
Property to the extent such actions are required by any applicable Hazardous
Waste Laws, and whether or not Grantor was responsible for the existence of the
Hazardous Materials in, on, over, under or about the Property or the ground
water of the Property. "HAZARDOUS MATERIALS" shall include, but not be limited
to, substances defined as "hazardous substances," "hazardous materials," or
"toxic substances" under any Hazardous Waste Laws.

                  (b)      In addition,Grantor shall not incorporate any
underground storage tanks into the Real Property without the prior written
consent of Lender, and shall insure that all tanks currently on the Real
Property comply with current Hazardous Waste Laws and underground storage tank
regulations and are properly registered.

         Grantor hereby agrees to indemnify and defend Lender and Trustees and
hold Lender and Trustees harmless from and against any and all losses,
liabilities, damages, injuries, costs, expenses, fines, fees, suits, actions,
debts, obligations, and claims of any and every kind whatsoever, including
Reasonable Attorneys' Fees (collectively, "LOSSES") paid, incurred or suffered
by, or asserted against, Lender or Trustees for, with respect to, or as a direct
or indirect result of, the presence in, on, over, under or about, or the escape,
seepage, leakage, spillage, discharge, emission or release from, the Property of
any Hazardous Materials (including, without limitation, any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under any
Hazardous Waste Laws), regardless of the source of origination and whether or
not caused by, or within the control of, Grantor and including any claims of
lender's negligence or strict liability, but excluding Lender's willful
misconduct or gross negligence.

         Liability under this Section 3(b) and similar provisions in this Deed
of Trust and the other Loan Documents concerning Hazardous Materials shall
survive repayment of the Note, the Grantor's Guaranty, and satisfaction of this
Deed of Trust; provided, however, Grantor shall have no liability under this
Section 3(b) regarding Hazardous Materials if either (i) the Property becomes
contaminated subsequent to Lender's acquisition of the Property by foreclosure,
acceptance by Lender of a deed in lieu thereof, or subsequent to any transfer of
ownership of the Property which was approved or authorized by Lender in writing,
pursuant to this Deed of Trust, provided that such transferee assumes in writing
all of the obligations of Grantor with respect to Hazardous Materials pursuant
to the Loan Documents, or (ii) at such time Grantor provides Lender with an
environmental assessment report acceptable to Lender, in Lender's sole
discretion, showing the Property to be free of Hazardous Materials and not in
violation of any Hazardous Waste Laws. The burden of proof under this Section
3(b) with

                                                              Columbia, Maryland

                                       10



regard to establishing the date upon which any Hazardous Materials was released
in, on, over, under or about the Property shall be upon Grantor.

                  (c)      Grantor at all times shall maintain the Property in
full compliance with all federal, state, county, regional or local laws, codes,
ordinances, rules, regulations, decisions and orders currently in existence or
hereafter enacted or rendered, governing accessibility for the disabled,
including but not limited to: The Architectural Barriers Act of 1968; The
Rehabilitation Act of 1973; The Fair Housing Act of 1988; The Americans with
Disabilities Act; and The Maryland Elimination of Architectural Barriers Act
(collectively, the "ACCESSIBILITY LAWS").

         Grantor hereby agrees to indemnify and defend Lender and hold Lender
harmless from and against any and all Losses paid, incurred or suffered by, or
asserted against Lender for, with respect to, or as a direct or indirect result
of, the non-compliance of the Property with the Accessibility Laws whether or
not caused by, or within the control of, Grantor, and including any claims of
lender's negligence or strict liability, but excluding Lender's willful
misconduct or gross negligence.

         Liability under this Section 3(c) and similar provisions in this Deed
of Trust and the other Loan Documents concerning Accessibility Laws shall
survive repayment of the Note and satisfaction of this Deed of Trust; provided,
however, Grantor shall not be liable under this Section 3(c) for compliance with
any Accessibility Laws if such Accessibility Laws first become effective, or
such violations result from alterations or improvements to the Property that are
performed subsequent to Lender's acquisition of the Property by foreclosure or
acceptance of a deed in lieu thereof or subsequent to any transfer which was
approved or authorized by Lender pursuant to this Deed of Trust, provided that
such transferee assumes in writing all obligations pertaining to the
Accessibility Laws pursuant to this Deed of Trust and the other Loan Documents.
The burden of proof under this Section 3(c) with regard to establishing the date
upon which such non-compliance with any Accessibility Laws occurred at the
Property shall be upon Grantor.

                  (d)      Lender, and/or its agents, shall have the right and
shall be permitted, subject to the rights of Borders under the Borders Lease,
but shall not be required, at all reasonable times, to enter upon and inspect
the Property to insure compliance with the foregoing covenants, and any and all
other terms, covenants, conditions and agreements set forth in this Deed of
Trust.

         4.       PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Grantor shall
pay, or cause to be paid, all taxes, assessments and other charges as already
levied or assessed, or that may be hereafter levied or assessed, upon or against
the Property, when the same shall become due and payable according to Law,
before delinquency, and before any interest or penalty shall attach thereto, and
to deliver official receipts evidencing the

                                                              Columbia, Maryland

                                       11



payment of the same to Lender not later than thirty (30) days following the
payment of the same. Grantor shall have the right to contest, in good faith and
in accordance with applicable Laws and procedures, the proposed assessment of ad
valorem taxes or special assessments by governmental authorities having
jurisdiction over the Property; provided, however, Grantor shall give Written
Notice of its intent to bring such an action to Lender, and Lender may, in its
sole discretion, require Grantor to post a bond or other collateral satisfactory
to Lender (and acceptable to the title company insuring this Deed of Trust) as a
result of Grantor's act.

         5.       PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Grantor shall
immediately pay and discharge from time to time when the same shall become due,
all lawful claims and demands of mechanics, materialmen, laborers, realtors,
brokers and others which, if unpaid, might result in, or permit the creation of,
a lien, charge or encumbrance upon the Property or any part thereof, or on the
Rents, arising therefrom and, in general, to do or cause to be done everything
necessary so that the lien of this Deed of Trust shall be fully preserved, at
the sole cost of Grantor, without expense to Lender. Grantor shall have the
right to contest, in good faith and in accordance with applicable Laws and
procedures, mechanics', materialmens' and other such liens filed against the
Property; provided however, that Grantor shall give Written Notice to Lender of
its intent to bring such action, and Lender may, in Lender's sole discretion,
require Grantor to post a bond or other collateral satisfactory to Lender (and
acceptable to the title company insuring this Deed of Trust) as a result of
Grantor's act.

         6.       PAYMENT OF JUNIOR ENCUMBRANCES. Grantor shall permit no
default or delinquency under any other lien, imposition, charge or encumbrance
against the Property, even though junior and inferior to the lien of this Deed
of Trust; provided however, the foregoing shall not be construed to permit any
such additional lien or encumbrance against the Property, other than the
Permitted Exceptions.

         7.       PAYMENT OF MORTGAGE TAXES. Grantor shall pay any and all taxes
which may be levied or assessed directly or indirectly upon the Note and/or this
Deed of Trust (except for income taxes payable by Lender) or the Loan, without
regard to any Law which may be hereafter enacted imposing payment of the whole
or any part thereof upon Lender, its successors or assigns. Upon violation of
this covenant, or upon the rendering by any court of competent jurisdiction of a
decision that such a covenant by Grantor is legally inoperative, or if any court
of competent jurisdiction shall render a decision that the rate of said tax when
added to the rate of interest provided for in the Note exceeds the then maximum
rate of interest allowed by Law, then, and in any such event, the debt hereby
secured shall, at the option of Lender, its successors or assigns, become
immediately due and payable, anything contained in this Deed of Trust or in the
Grantor's Guaranty notwithstanding, without the imposition of a Prepayment
Premium (as defined in the Note). The additional amounts which may become due
and payable hereunder shall become a part of the Loan secured by this Deed of
Trust.

                                                              Columbia, Maryland

                                       12



         8.       HAZARD INSURANCE. Grantor shall continuously, during the term
of this Deed of Trust, keep the Improvements, Appurtenances, and Fixtures and
Personal Property, now or hereafter existing, erected, installed and located in
or upon the Real Property, insured with extended coverage insurance against loss
or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine
subsidence, acts of terrorism, and such other hazards, casualties, contingencies
and perils including, without limitation, other risks insured against by persons
operating like properties in the locality of the Property, or otherwise deemed
necessary or advisable by Lender or any Rating Agency (as hereinafter defined),
on such forms and with such deductibles as may be required by Lender or any
Rating Agency, covering the Property in the amount of the full replacement cost
thereof, (without taking into account any depreciation) less excavating and
foundation costs, and covering all loss or abatement of rental or other income,
without a provision for co-insurance, in an amount equal to the scheduled rental
income of the Property for at least twelve (12) months, or if applicable,
business interruption insurance in an amount sufficient to pay debt service on
the Note, operating expenses, taxes and insurance on the Property for a period
of twelve (12) months, and covering loss by flood (if the Property lies in a
Special Flood Hazard Area as designated on the Department of Housing and Urban
Development's Maps, or other flood prone designation) in an amount equal to the
outstanding principal balance of the Loan or such other amount as approved by
Lender, and earthquake insurance with a deductible amount of no more than ten
percent (10%) of the policy amount if, in the judgment of Lender's inspecting
architect, the Property lies in an area of anticipated significant seismic
activity, and "Ordinance or Law Coverage" or "Enforcement" endorsements in
amounts satisfactory to Lender if any of the Improvements or the use of the
Property shall at any time constitute legal non-conforming structures or uses or
the ability to rebuild the Improvements is restricted or prohibited, and
comprehensive boiler and machinery insurance (without exclusion for explosion),
if applicable, in amounts as shall be reasonably required by Lender or any
Rating Agency and covering all boilers or other pressure vessels, machinery and
equipment located at or about the Property (including, without limitation,
electrical equipment, sprinkler systems, heating and air conditioning equipment,
refrigeration equipment and piping). All such insurance shall be carried with a
company or companies licensed to do business in the State, which is acceptable
to Lender, which company or companies shall have a rating at the time this Deed
of Trust is executed equivalent to at least A:X as shown in the most recent
Best's Key Rating Guide. The original policy or policies and renewals thereof
(or, at the sole option of Lender, duplicate originals or certified copies
thereof), together with receipts evidencing payment of the premium therefor,
shall be deposited with, held by and are hereby assigned to, Lender as
additional security for the Loan. Each such policy of insurance shall contain a
noncontributing loss payable clause in favor of and in a form acceptable to
Lender, and shall provide for not less than thirty (30) days prior Written
Notice to Lender of any intent to modify, non-renew, cancel or terminate the
policy or policies, or the expiration of such policies of insurance, or the
exclusion of any individual risk such as acts of terrorism. If the insurance
required under this Section 8 or any portion thereof is maintained pursuant to a
blanket policy, Grantor shall furnish to Lender a certified copy of such policy,
together with an original Evidence of Insurance Certificate (Acord Form 27) for

                                                              Columbia, Maryland

                                       13



hazard insurance indicating that Lender is an additional insured under such
policy in regard to the Property and showing the amount of coverage apportioned
to the Property, which coverage shall be in an amount sufficient to satisfy the
requirements hereof. Not less than fifteen (15) days prior to the expiration
dates of each policy required of Grantor hereunder, Grantor will deliver to
Lender a renewal policy or policies marked "premium paid" or accompanied by
other evidence of payment and renewal satisfactory to Lender. In the event of
foreclosure of this Deed of Trust or other transfer of title to the Property in
extinguishment of the Loan, all right, title and interest of Grantor, in and to
any insurance policies then in force including any rights to unearned premiums,
and in and to insurance proceeds then payable, shall pass to the purchaser or
grantee.

         For so long as the Borders Lease remains in effect with Borders as the
tenant thereunder, then to the extent that Borders self-insures to satisfy its
insurance obligations under the Borders Lease, Lender shall accept such
self-insurance as satisfying the obligation of Grantor to provide insurance
under this Section 8, provided that (i) Borders, or the guarantor of the Borders
Lease, Boarders Group, Inc., maintains a minimum net worth of not less than Two
Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance
otherwise satisfies the requirements of this Section 8 as to the amount required
to be maintained by Borders, and (iii) Grantor provides to Lender written
verification of such coverage in form and substance reasonably acceptable to
Lender. Notwithstanding the foregoing, Lender shall have the right require
Grantor to maintain in effect a separate policy of liability insurance with
respect to the Property meeting the requirements of Section 9 of this Deed of
Trust.

         In the event of loss covered by insurance maintained by Grantor with
respect to the Property, including, without limitation, insurance covering
hazards, casualties, contingencies and perils for which insurance has been
required by Lender hereunder, Grantor shall give immediate notice thereof to
Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an
interest for Lender to, at its option, make proof of loss and/or to file a claim
thereunder. Each insurance company concerned is hereby notified, authorized and
directed to make payment for such loss directly to Lender, instead of to Grantor
and Lender jointly, and Grantor hereby authorizes Lender to adjust and
compromise any losses for which insurance proceeds are payable under any of the
aforesaid insurance policies and, after deducting the costs of collection, to
apply the proceeds of such insurance, at its option either: (a) to the
restoration or repair of the insured Improvements, Appurtenances, and Fixtures
and Personal Property, provided that, in the opinion and sole discretion of
Lender, such restoration or repair is reasonably practical and, provided
further, that, in the opinion and sole discretion of Lender, either: (i) the
insurance proceeds so collected are sufficient to cover the cost of such
restoration or repair of the damage or destruction with respect to which such
proceeds were paid, or (ii) the insurance proceeds so collected are not
sufficient alone to cover the cost of such restoration or repair, but are
sufficient therefor when taken together with funds provided and made available
by Grantor from other sources; in which event Lender shall make such insurance
proceeds available to Grantor for the purpose of effecting such restoration or
repair;

                                                              Columbia, Maryland

                                       14



but Lender shall not be obligated to see to the proper application of such
insurance proceeds nor shall the amount of funds so released or used be deemed
to be payment of or on account of the Loan; or (b) to the reduction of the Loan,
notwithstanding the fact that the amount owing thereon may not then be due and
payable or that said Loan is otherwise adequately secured, in which event such
proceeds shall be applied at par against the Loan and the monthly payment due on
account of such Loan shall be reduced accordingly as calculated by Lender. None
of such actions taken by Lender shall be deemed to be or result in a waiver or
impairment of any equity, lien or right of Lender under and by virtue of this
Deed of Trust, nor will the application of such insurance proceeds to the
reduction of the Loan serve to cure any default in the payment thereof. In the
event of foreclosure of this Deed of Trust or other transfer of title to the
Property in extinguishment of the Loan, all right, title and interest of Grantor
in and to any insurance policies then in force including any rights to unearned
premiums and in and to insurance proceeds then payable, shall pass to the
purchaser or grantee.

         In case of Grantor's failure to keep the Property properly insured as
required herein, Lender, its successors or assigns, may, at its option (but
shall not be required to) acquire such insurance as required herein at Grantor's
sole expense.

         Notwithstanding anything set forth in this Section 8 to the contrary,
in the event of loss or damage to the Property by fire or other casualty covered
by insurance maintained by Grantor with respect to the Property, including,
without limitation, insurance which has been required by Lender hereunder and
provided by Grantor, and the amount of such loss or damage does not exceed
twenty-five percent (25%) of the unpaid principal balance of the Note, Lender
hereby agrees to allow the proceeds of insurance to be used for the restoration
of the Property and to release such insurance proceeds to Grantor as such
restoration progresses, provided:

                  (a)      Neither Grantor nor Borrower is in default under any
of the terms, covenants and conditions of this Deed of Trust, the Grantor's
Guaranty, the Note or any of the other Loan Documents;

                  (b)      The Improvements, after such restoration, shall be at
least eighty percent (80%) leased pursuant to leases approved in writing by
Lender;

                  (c)      The plans and specifications for the restoration of
the Property are approved in writing by Lender in advance;

                  (d)      At all times during such restoration,Grantor has
deposited with Lender funds which, when added to the insurance proceeds received
by Lender, are sufficient to complete the restoration of the Property in
accordance with the approved plans and specifications, and all applicable
building codes, zoning ordinances, regulations and

                                                              Columbia, Maryland

                                       15



Accessibility Laws, and further, that the funds retained by Lender are
sufficient to complete the restoration of the Property as certified to Lender by
Lender's inspecting architect/engineer;

                  (e)      Grantor provides suitable completion, payment and
performance bonds, builders' all risk insurance, and all necessary licenses and
permits for such restoration in form and amount acceptable to Lender;

                  (f)      The insurer under such policies of fire or other
casualty insurance does not assert any defense to payment under such policies
against Lender, Grantor, any tenant, or third party of Grantor with regard to
the Property;

                  (g)      Lender shall have the option, upon the completion of
such restoration of the Property, to apply any surplus insurance proceeds
remaining after the completion of such restoration, at par, to the reduction of
the outstanding principal balance of the Note; notwithstanding the fact that the
amount owing thereon may not then be due and payable or that said Loan is
otherwise adequately secured;

                  (h)      The funds held by Lender shall be disbursed no more
often than once per month and in not more than five (5) increments of not less
than Fifty Thousand Dollars ($50,000) each, except the final disbursement of
such funds which may be in an amount less than Fifty Thousand Dollars ($50,000);

                  (i)      Lender's obligation to make any such disbursement
shall be conditioned upon Lender's receipt of written certification from
Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender
by Grantor) that all construction and work for which such disbursement is
requested has been completed in accordance with the approved plans and
specifications and in accordance with all applicable building codes, zoning
ordinances and all other Laws and, further, that Grantor has deposited with
Lender sufficient funds to complete such restoration in accordance with Section
8(d);

                  (j)      In the reasonable judgment of the Lender, the
Property can be restored within six months after insurance proceeds are made
available and at least six months prior to the Maturity Date (as defined in the
Note) to an economic unit not less valuable (including an assessment by Lender
of the impact of the termination of any Occupancy Leases due to such casualty)
and not less useful than the same was prior to the casualty, and after such
restoration will adequately secure the outstanding balance of the Loan; and

                  (k)      Lender shall be entitled to require and to impose
such other conditions to the release of such funds as would be customarily or
reasonably be required and imposed by institutional mortgage lenders for a
project of similar nature and cost.

                                                              Columbia, Maryland

                                       16



         In the event of a casualty, provided that Grantor is not then in
default hereunder beyond the expiration of applicable notice and cure periods,
then notwithstanding any provision of this Section 8 to the contrary, Lender
shall make insurance proceeds available for restoration of the Property to the
extent required under the terms of the Borders Lease.

         9.       LIABILITY INSURANCE. Grantor shall carry and maintain such
commercial general liability insurance as may from time to time be required by
Lender or any Rating Agency, taking into consideration the type of property
being insured and the corresponding liability exposure, on forms, with
deductibles, in amounts and with such company or companies licensed to do
business in the State and as may be acceptable to Lender. All such commercial
general liability insurance shall be carried with a company or companies which
have and maintain a rating equivalent to at least A:X as shown in the most
recent Best's Key Rating Guide. The original policy or policies and all renewals
thereof (or, at the sole option of Lender, duplicate originals or certified
copies thereof), together with a Certificate of Insurance (Acord Form 25S) and
receipts evidencing payment of the premium therefor, shall be deposited with,
held by and are hereby assigned to, Lender as additional security for the Loan.
Such policy or policies of insurance shall name Lender as an additional insured
and shall provide for not less than thirty (30) days prior Written Notice to
Lender of any intent to modify, cancel, non-renew, or terminate the policy or
policies or the expiration of such policy or policies of insurance, or the
exclusion of any individual risk such as acts of terrorism. Not less than
fifteen (15) days prior to the expiration dates of each policy or policies
required of Grantor hereunder, Grantor will deliver to Lender a renewal policy
or policies marked "premium paid" or accompanied by other evidence of payment
and renewal satisfactory to Lender. In the event of foreclosure of this Deed of
Trust or other transfer of title to the Property in extinguishment of the Loan,
all right, title and interest of Grantor, in and to any insurance policies then
in force including any rights to unearned premiums, and in and to insurance
proceeds then payable, shall pass to the purchaser or grantee. In case of
Grantor's failure to keep the Property properly insured as required herein,
Lender, its successors or assigns, may, at its option (but shall not be required
to) acquire such insurance as required herein at Grantor's sole expense.

         10.      COMPLIANCE WITH LAWS.

                  (a)      Grantor shall observe, abide by and comply with all
federal, regional, state and local laws, codes, ordinances, statutes, rules,
regulations, decisions, orders, requirements or decrees relating to the Property
enacted, promulgated or issued by any federal, state, county or local
governmental or quasi-governmental authority or any agency or subdivision
thereof having jurisdiction over Grantor or the Property, which now or hereafter
affect Grantor or the Property, including Hazardous Waste Laws and Accessibility
Laws (collectively, the "LAWS"), and to observe and comply with all conditions
and requirements necessary to preserve and extend any and all rights, licenses,
permits (including, but not limited to, zoning, variances, special exceptions
and nonconforming uses), privileges,

                                                              Columbia, Maryland

                                       17



franchises and concessions which are applicable to the Property, or which have
been granted to or contracted for by Grantor in connection with any existing,
presently contemplated or future uses of the Property.

                  (b)      Grantor shall not engage in any transaction which
would cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Grantor's Guaranty, this Deed
of Trust and the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Grantor shall
deliver to Lender such certifications or other evidence from time to time
throughout the term of this Deed of Trust, as requested by Lender in its sole
discretion, that (i) Grantor is not an "employee benefit plan" as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Grantor is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; and (iii) one or more of the following circumstances is
true:

                           (1)      Equity interests in Grantor are publicly
         offered securities, within the meaning of 29 C.F.R. Section
         2510.3-101(b)(2);

                           (2)      Less than twenty-five percent (25%) of each
         outstanding class of equity interests in Grantor are held by "benefit
         plan investors" within the meaning of 29 C.F.R. Section
         2510.3-101(f)(2); or

                           (3)      Grantor qualifies as an "operating company"
         or a "real estate operating company" within the meaning of 29 C.F.R.
         Section 2510.3-101(c) or (e) or an investment company registered under
         The Investment Company Act of 1940.

         11.      MAINTENANCE OF PERMITS. Grantor shall obtain, keep and
constantly maintain in full force and effect during the entire term of this Deed
of Trust, all certificates, licenses and permits necessary to keep the Property
operating for the Existing Use and, except as specifically provided for in this
Deed of Trust, not to assign, transfer or in any manner change such
certificates, licenses or permits without first receiving the written consent of
Lender.

         12.      OBLIGATIONS OF GRANTOR AS LESSOR.

                  (a)      Grantor shall perform every obligation of Grantor (as
the landlord) and enforce every obligation of the tenant in any and every lease,
license or other occupancy agreement of or affecting the Property or any part
thereof (the "OCCUPANCY LEASES"), and not to modify, alter, waive or cancel any
such Occupancy Leases or any part thereof or rights thereunder, without the
prior written consent of Lender (but such consent shall not be required for such
action as to Occupancy Leases of three thousand (3,000) square feet or less if
such

                                                              Columbia, Maryland

                                       18



action is in the ordinary course of business of owning and operating the
Property in a prudent and business-like manner, on then current market terms),
nor collect for more than thirty (30) days in advance of the date due any Rents
that may be collectible under any such Occupancy Leases and, except as provided
for in this Deed of Trust, not to assign any such Occupancy Lease(s) or any such
Rents relating thereto, to any party other than Lender, without the prior
written consent of Lender. Grantor will notify Lender in writing of any default
under any Occupancy Lease. In the event of default under any such Occupancy
Lease by reason of failure of Grantor to keep or perform one or more of the
covenants, agreements or conditions thereof, Lender is hereby authorized and
empowered, and may, at its sole option, remedy, remove or cure any such default,
and further, Lender may, at its sole option and in its sole discretion but
without obligation to do so, pay any sum of money deemed necessary by Lender for
the performance of said covenants, agreements and conditions, or for the curing
or removal of any such default, and incur all expenses and obligations which
Lender may consider necessary or reasonable in connection therewith, and Grantor
shall repay on demand all such sums so paid or advanced by Lender together with
interest thereon until paid at the lesser of either: (i) the highest rate of
interest then allowed by the Laws of the State, or, if controlling, the Laws of
the United States, or (ii) the then applicable interest rate of the Note plus
five hundred (500) basis points per annum; all of such sums, if unpaid, shall be
added to and become part of the Loan.

                  (b)      All such Occupancy Leases hereafter made shall be
subject to the approval of Lender and: (i) shall be at competitive market rental
rates then prevailing in the geographic area for projects used for the Existing
Use comparable to the Property; (ii) shall have lease terms of not less than
three years; and (iii) at Lender's option, shall be superior or subordinate in
all respects to the lien of this Deed of Trust. Provided, however, that Lender
shall not require approval in advance of any Occupancy Leases which conform to
the Grantor's Form Lease (as hereinafter defined) as previously approved by
Lender, except as set forth below. Neither the right nor the exercise of the
right herein granted unto Lender to keep or perform any such covenants,
agreements or conditions as aforesaid shall preclude Lender from exercising its
option to cause the whole Loan to become immediately due and payable by reason
of Grantor's default in keeping or performing any such covenants, agreements or
conditions.

                  (c)      Lender has approved a form of Occupancy Lease to be
used by Grantor in connection with the Property (the "FORM LEASE"). Grantor
shall not, without the prior written consent of Lender, modify or alter the Form
Lease in any material respect. In addition, Grantor shall not, without the prior
written consent of Lender, surrender, terminate, modify or alter, either orally
or in writing, any Occupancy Lease now existing or hereafter made with any Major
Tenant (as hereinafter defined) for all or part of the Property, permit an
assignment or sublease of any such Occupancy Lease, or request or consent to the
subordination of any Occupancy Lease to any lien subordinate to this Deed of
Trust. Grantor shall furnish Lender with copies of all executed Occupancy Leases
of all or any part of the

                                                              Columbia, Maryland

                                       19



Property now existing or hereafter made, and Grantor shall assign to Lender
(which assignment shall be in form and content acceptable to Lender), as
additional security for the Grantor's Guaranty and the Loan, all Occupancy
Leases now existing or hereafter made for all or any part of the Property.

                  (d)      Notwithstanding the foregoing approval by Lender of
Grantor's Form Lease, Lender hereby specifically reserves the right to approve
all prospective tenants under all Occupancy Leases hereafter proposed to be made
if either: (i) the term thereof, excluding options to renew the same, exceeds
five years; or (ii) the net rentable area to be occupied thereunder, including
expansion options, exceeds ten percent (10%) of the net leasable area of each of
the buildings comprising the Improvements (the tenants under such leases being
hereinafter referred to as "MAJOR TENANTS"). Grantor shall notify Lender in
writing of all prospective Major Tenants, and shall deliver to Lender, at
Grantor's sole cost and expense, a copy of the prospective Major Tenant's
current financial statement and the most recent Dun & Bradstreet credit report
on said prospective Major Tenant. The financial statement delivered to Lender
hereunder shall be certified as true and correct by the Major Tenant, or, if
available, by a certified public accountant.

                  (e)      In no event shall Grantor exercise any right to
relocate any tenant outside the Property pursuant to any right set forth in an
Occupancy Lease without the prior written consent of Lender.

         13.      MAINTENANCE OF PARKING & ACCESS; PROHIBITION AGAINST
ALTERATION; SEPARATE TAX LOT.

                  (a)      Grantor shall construct, keep and constantly
maintain, as the case may be, all curbs, drives, parking areas and the number of
parking spaces heretofore approved by Lender, or heretofore or hereafter
required by any Laws or any governmental body, agency or authority having
jurisdiction over Grantor or the Property, and as required by the terms of the
Occupancy Leases, and not to alter, erect, build or construct upon any portion
of the Property, any building, structure or improvement of any kind whatsoever,
the erection, building or construction of which has not been previously approved
by Lender in writing, which approval shall be at the sole discretion of Lender.

                  (b)      Grantor shall cause the Property to remain separately
assessed for real estate tax purposes as a separate tax lot or lots.

         14.      EXECUTION OF ADDITIONAL DOCUMENTS. Grantor shall do, make,
execute, acknowledge, witness and deliver all deeds, conveyances, mortgages,
deeds of trust, assignments, estoppel certificates, subordination
non-disturbance and attornments, notices of assignments, transfers, assurances,
security agreements, financing statements and renewals thereof, and all other
instruments or other acts necessary, as Lender shall from time to time

                                                              Columbia, Maryland

                                       20



require for the purpose of better assuring, conveying, assigning, transferring,
securing and confirming unto Lender the Property and rights hereby encumbered,
created, conveyed, assigned or intended now or hereafter so to be encumbered,
created, conveyed or assigned, or which Grantor may now be or may hereafter
become bound to encumber, create, convey or assign to Lender, or for the purpose
of carrying out the intention or facilitating the performance of the terms of
this Deed of Trust, or for filing, registering or recording this Deed of Trust,
and to pay all filing, registration or recording fees and all taxes, costs and
other expenses, including Reasonable Attorneys' Fees, incident to the
preparation, execution, acknowledgment, delivery and recordation of any of the
same. By signing this Deed of Trust, Grantor authorizes Lender to file such
financing statements, with or without the signature of Grantor, as Lender may
elect, as may be necessary or desirable to perfect the lien of Lender's security
interest in the Fixtures and Personal Property. Without limiting any other
provision herein, Grantor hereby authorizes Lender to file one or more financing
statements and any renewal or continuation statements thereof, describing the
Property and the proceeds of the Property, including, without limitation, a
financing statement covering "all assets of Grantor all proceeds therefrom, and
all rights and privileges with respect thereto." Grantor further authorizes
Lender to file, with or without any additional signature from Grantor, as Lender
may elect, such amendments and continuation statements as Lender may deem
necessary or desirable from time to time to perfect or continue the lien of
Lender's security interest in the Fixtures and Personal Property. Grantor hereby
ratifies any financing statements that may have been filed by Lender in advance
of the date hereof to perfect Lender's security interest in the Fixtures and
Personal Property.

         15.      AFTER-ACQUIRED PROPERTY SECURED. Grantor shall subject to the
lien of this Deed of Trust all right, title and interest of Grantor in and to
all extensions, improvements, betterments, renewals, substitutions and
replacements of, and all additions and appurtenances to, the Property
hereinabove described, hereafter acquired by or released to Grantor, or
constructed, assembled or placed by Grantor on the Real Property, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, deed of trust,
encumbrance, conveyance, assignment or other act by Grantor, as fully,
completely and with the same effect as though now owned by Grantor and
specifically described herein, but at any and all times, Grantor will execute
and deliver to Lender any and all such further assurances, mortgages, deeds of
trust, conveyances, security agreements, financing statements or assignments
thereof or security interests therein as Lender may reasonably require for the
purpose of expressly and specifically subjecting the same to the lien of this
Deed of Trust.

         16.      PAYMENTS BY LENDER ON BEHALF OF GRANTOR. Grantor shall make
payment of any taxes, assessments or public charges on or with respect to the
Property before the same shall become delinquent, or to make payment of any
insurance premiums or other charges, impositions, or liens herein or elsewhere
required to be paid by Grantor, or if

                                                              Columbia, Maryland

                                       21



Grantor shall fail so to do, then Lender, at its sole option, but without
obligation to do so, may make payment or payments of the same and also may
redeem the Property from tax sale without any obligation to inquire into the
validity of such taxes, assessments, charges, impositions or liens. In the case
of any such payment by Lender, Grantor agrees to reimburse Lender, upon demand
therefor, the amount of such payment and of any fees and expenses attendant in
making the same, together with interest thereon at the lesser of either: (a) the
highest rate of interest then allowed by the Laws of the State or, if
controlling, the Laws of the United States, or (b) the then applicable interest
rate of the Note plus five hundred (500) basis points per annum; and until paid
such amounts and interest shall be added to and become part of the Loan to the
same extent that this Deed of Trust secures the repayment of the Loan. In making
payments authorized by the provisions of this Section 16, Lender may do so
whenever, in Lender's sole judgment and discretion, such advance or advances are
necessary or desirable to protect the full security intended to be afforded by
this Deed of Trust. Neither the right nor the exercise of the rights herein
granted to Lender to make any such payments as aforesaid shall preclude Lender
from exercising its option to cause the Loan to become immediately due and
payable by reason of Grantor's default in making such payments as hereinabove
required.

         17.      FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE
PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this
Deed of Trust, Grantor shall deposit with Lender, together with and in addition
to each monthly payment due on account of the Loan, an amount equal to
one-twelfth (1/12th) of the annual total of such taxes, assessments, insurance
premiums and other charges (all as estimated by Lender in its sole discretion)
so that, at least thirty (30) days prior to the due date thereof, Lender shall
be able to pay in full all such taxes, assessments, insurance premiums and other
charges as the same shall become due. Lender may hold the sums so deposited
without paying interest, commingle same with its general funds and/or apply the
same to the payment of said taxes, assessments, insurance premiums or other
charges as they become due and payable. If at any time the funds so held by
Lender are insufficient to pay such taxes, assessments, insurance premiums or
other charges as they become due and payable, Grantor shall immediately, upon
Written Notice and demand by Lender, deposit with Lender the amount of such
deficiency. The failure on the part of Grantor to do so shall entitle Lender, at
Lender's sole option, to make such payments in accordance with the rights and
pursuant to the conditions elsewhere provided in this Deed of Trust. Grantor
hereby grants to Lender a security interest in all funds deposited with Lender,
and such funds are hereby pledged by Grantor to Lender for the purpose of
securing all indebtedness and obligations secured by this Deed of Trust.
Whenever any default exists under this Deed of Trust, Lender may, at Lender's
sole option but without an obligation so to do, apply any funds so held by
Lender pursuant to this Section 17 toward the payment of the Loan,
notwithstanding the fact that the amount owing thereon may not then be due and
payable or that the Loan may otherwise be adequately secured, in such order and
manner of application as Lender may elect.

                                                              Columbia, Maryland

                                       22



         18.      CONDEMNATION; EMINENT DOMAIN. All claims and rights of action
for, and all awards and other compensation heretofore or hereafter made to
Grantor and all subsequent owners of the Property in any taking by eminent
domain, recovery for inverse condemnation or by deed in lieu thereof, whether
permanent or temporary, of all or any part of the Property or any easement or
any appurtenance thereto, including severance and consequential damages and
change in grade of any way, street, avenue, road, alley, passage or public
place, are hereby assigned to Lender. Grantor hereby irrevocably appoints Lender
as its attorney-in-fact, coupled with an interest, and authorizes, directs and
empowers Lender, at the option of Lender as said attorney-in-fact, on behalf of
Grantor, its successors and assigns, to adjust or compromise the claim for any
such award, and alone to collect and receive the proceeds thereof, to give
proper receipts and acquittances therefor and, after deducting any expenses of
collection, Lender shall at its sole option either:

                  (a)      apply the net proceeds as a credit upon any portion
of the Loan, as selected by Lender, notwithstanding the fact that the amount
owing thereon may not then be due and payable, or that the Loan is otherwise
adequately secured. In the event Lender applies such awards to the reduction of
the outstanding Loan guaranteed by the Grantor's Guaranty, such proceeds shall
be applied at par, and the monthly installments due and payable under the Note
shall be reduced accordingly as calculated by Lender; however no such
application shall serve to cure an existing default in the payment of the Note
or the Grantor's Guaranty; or

                  (b)      hold said proceeds without any allowance of interest,
and make the same available for restoration or rebuilding of the Improvements.
In the event that Lender makes said proceeds available to reimburse Grantor for
the cost of the restoration or rebuilding of the Improvements on the Real
Property, such proceeds shall be made available in the manner and under the same
conditions as required under Section 8 hereof. If the proceeds are made
available by Lender to reimburse Grantor for the cost of said restoration or
rebuilding, any surplus which may remain out of said award after payment of such
cost of restoration or rebuilding, shall be applied on account of the Loan at
par notwithstanding the fact that the amount owing thereon may not then be due
and payable or that the Loan may otherwise be adequately secured.

         In the event of a taking or condemnation, provided that Grantor is not
then in default hereunder beyond the expiration of applicable notice and cure
periods, then notwithstanding any provision of this Section 19 to the contrary,
Lender shall make condemnation proceeds available for restoration of the
Property to the extent required under the terms of the Borders Lease.

         Grantor further covenants and agrees to give Lender immediate notice of
the actual or threatened commencement of any proceedings under eminent domain,
and to deliver to Lender copies of any and all papers served in connection with
any such proceedings. Grantor further covenants and agrees to make, execute and
deliver to Lender, at any time or times, upon

                                                              Columbia, Maryland

                                       23



request, free, clear and discharged of any encumbrance of any kind whatsoever,
any and all further assignments and/or other instruments deemed necessary by
Lender for the purpose of validly and sufficiently assigning all such awards and
other compensation heretofore or hereafter made to Lender (including the
assignment of any award from the United States government at any time after the
allowance of the claim therefor, the ascertainment of the amount thereof and the
issuance of the warrant for payment thereof).

         It shall be a default hereunder if either: (i) any part of any of the
Improvements situated on the Real Property shall be condemned by any
governmental authority having jurisdiction; or (ii) lands constituting a portion
of the Real Property shall be condemned by any governmental authority having
jurisdiction, such that the remaining Property is in violation of applicable
parking, zoning, platting, or other ordinances, or fails to comply with the
terms of the Occupancy Leases with Major Tenants. In either of said events,
Lender shall be entitled to exercise any or all remedies provided or referenced
in this Deed of Trust or the other Loan Documents, including the application of
condemnation proceeds to the outstanding principal balance of the Note at par,
and the right to accelerate the maturity date of the Note and require payment in
full without the imposition of a Prepayment Premium.

         19.      COSTS OF COLLECTION. In the event that the Note or the
Grantor's Guaranty is placed in the hands of an attorney for collection, or in
the event that Lender shall become a party either as plaintiff or as defendant,
in any action, suit, appeal or legal proceeding (including, without limitation,
foreclosure, condemnation, bankruptcy, administrative proceedings or any
proceeding wherein proof of claim is by law required to be filed), hearing,
motion or application before any court or administrative body in relation to the
Property or the lien and security interest granted or created hereby or herein,
or for the recovery or protection of the Loan or the Property, or for the
foreclosure of this Deed of Trust, or for the enforcement of the terms and
conditions of the Loan Documents, Grantor shall indemnify, save, defend and hold
Lender harmless from and against any and all Losses incurred by Lender on
account thereof, and Grantor shall repay, on demand, all such Losses, together
with interest thereon until paid at the lesser of either (a) the highest rate of
interest then allowed by the Laws of the State, or, if controlling, the Laws of
the United States, or (b) the then applicable rate of interest of the Note plus
five hundred (500) basis points per annum; all of which sums, if unpaid, shall
be added to and become a part of the Loan.

         20.      DEFAULT RATE. Any sums not paid when due, whether maturing by
lapse of time or by reason of acceleration under the provisions of the Note, the
Grantor's Guaranty, this Deed of Trust, or any of the other Loan Documents, and
whether principal, interest or money owing for advancements pursuant to the
terms of this Deed of Trust or any other Loan Document, shall bear interest
until paid at the lesser of either (a) the highest rate of interest then allowed
by the Laws of the State, or, if controlling, the Laws of the United States, or
(b) the then applicable rate of interest of the Note plus five hundred (500)
basis points per annum; all of which sums shall be added to and become a part of
the Loan.

                                                              Columbia, Maryland

                                       24



         21.      SAVINGS CLAUSE. Notwithstanding any provisions in the Note,
the Grantor's Guaranty, or in this Deed of Trust to the contrary, the total
liability for payments in the nature of interest, including but not limited to
Prepayment Premiums, default interest and late payment charges, shall not exceed
the limits imposed by the Laws of the State or, if controlling, the Laws of the
United States, relating to maximum allowable charges of interest. Lender shall
not be entitled to receive, collect or apply, as interest on the Loan, any
amount in excess of the maximum lawful rate of interest permitted to be charged
by any Laws. In the event Lender ever receives, collects or applies as interest
any such excess, such amount which would be excessive interest shall be applied
to reduce the unpaid principal balance of the Loan evidenced by the Note and
guaranteed by the Grantor's Guaranty. If the unpaid principal balance of such
Loan has been paid in full, any remaining excess shall be forthwith returned to
Grantor.

         22.      BANKRUPTCY, REORGANIZATION OR ASSIGNMENT.

                  (a)      It shall be a default hereunder if Borrower or
Grantor or any general partner or managing member of Borrower or Grantor shall:
(a) elect to dissolve or liquidate its business organization or wind up its
business affairs without receiving the prior written approval of Lender; (b)
consent to the appointment of a receiver, trustee or liquidator of all or a
substantial part of its assets; (c) be adjudicated as bankrupt or insolvent, or
file a voluntary petition in bankruptcy, or admit in writing its inability to
pay its debts as they become due; (d) make a general assignment for the benefit
of creditors; (e) file a petition under or take advantage of any insolvency law;
(f) file an answer admitting the material allegations of a petition filed
against Borrower or Grantor or any general partner or managing member of
Borrower or Grantor in any bankruptcy, reorganization or insolvency proceeding,
or fail to cause the dismissal of such petition within thirty (30) days after
the filing of said petition; (g) take action for the purpose of effecting any of
the foregoing; or (h) if any order, judgment or decree shall be entered upon an
application of a creditor of Borrower or Grantor or any general partner or
managing member of Borrower or Grantor by a court of competent jurisdiction
approving a petition seeking appointment of a receiver or trustee of all or a
substantial part of Borrower's or Grantor's assets or any of Borrower's or
Grantor's general partner's or managing member's assets and such order, judgment
or decree shall continue unstayed and in effect for a period of thirty (30)
days.

                  (b)      Grantor covenants and agrees that it has not and
shall not:

                           (i)      engage in any business or activity other
         than the acquisition, ownership, operation and maintenance of the
         Property, and activities incidental thereto;

                           (ii)     acquire or own any material asset other than
         (1) the Property, and (2) such incidental Fixtures and Personal
         Property as may be necessary for the operation of the Property;

                                                              Columbia, Maryland

                                       25



                           (iii)    merge into or consolidate with any person or
         entity or dissolve, terminate or liquidate in whole or in part,
         transfer or otherwise dispose of all or substantially all of its assets
         or change its legal structure, without in each case Lender's consent;

                           (iv)     fail to preserve its existence as an entity
         duly organized, validly existing and in good standing under the laws of
         the jurisdiction of its organization or formation, or without the prior
         written consent of Lender, amend, modify, terminate or fail to comply
         with the provisions of Grantor's Governing Documents (as hereafter
         defined);

                           (v)      own any subsidiary or make any investment in
         or acquire the obligations or securities of any other person or entity
         without the consent of Lender;

                           (vi)     commingle its assets with the assets of any
         of its partner, members, shareholders, affiliates, or of any other
         person or entity or transfer any assets to any such person or entity
         other than distributions on account of equity interests in the Grantor
         permitted hereunder and properly accounted for;

                           (vii)    incur any debt, secured or unsecured, direct
         or contingent (including guaranteeing any obligation, other than the
         Loan and the Affiliate Loans), other than the Loan, except unsecured
         trade and operational debt incurred with trade creditors in the
         ordinary course of its business of owning and operating the Property in
         such amounts as are normal and reasonable under the circumstances,
         provided that such debt is not evidenced by a note and is paid when due
         and provided in any event the outstanding principal balance of such
         debt shall not exceed at any one time 1% of the outstanding Loan.
         Grantor shall not be deemed in default of the foregoing restrictions by
         virtue of any guaranty delivered by Grantor with respect to the
         Affiliate Loans;

                           (viii)   allow any person or entity to pay its debts
         and liabilities (except the Borrower or a Guarantor - or in connection
         with the cross-default and cross collateralization of the Affiliate
         Loans) or fail to pay its debts and liabilities solely from its own
         assets;

                           (ix)     fail to maintain its records, books of
         account and bank accounts separate and apart from those of the
         shareholders, partners, members, principals and affiliates of Grantor,
         the affiliates of a shareholder, partner or member of Grantor, and any
         other person or entity or fail to prepare and maintain its own
         financial statements in accordance with generally accepted accounting
         principles and susceptible to audit, or if such financial statements
         are consolidated fail to cause such financial statements to contain
         footnotes disclosing that the Property is actually owned by the
         Grantor;

                                                              Columbia, Maryland

                                       26



                           (x)      enter into any contract or agreement with
         any shareholder, partner, member, principal or affiliate of Grantor,
         any guarantor of all or a portion of the Loan (a "GUARANTOR") or any
         shareholder, partner, member, principal or affiliate thereof, except
         upon terms and conditions that are intrinsically fair and substantially
         similar to those that would be available on an arms-length basis with
         third parties other than any shareholder, partner, member, principal or
         affiliate of Grantor or Guarantor, or any shareholder, partner, member,
         principal or affiliate thereof;

                           (xi)     seek dissolution or winding up, in whole or
         in part;

                           (xii)    fail to correct any known misunderstandings
         regarding the separate identity of Grantor;

                           (xiii)   hold itself out to be responsible or pledge
         its assets or credit worthiness for the debts of another person or
         entity or allow any person or entity to hold itself out to be
         responsible or pledge its assets or credit worthiness for the debts of
         the Grantor (except for a Guarantor);

                           (xiv)    make any Loan or advances to any third
         party, including any shareholder, partner, member, principal or
         affiliate of Grantor, or any shareholder, partner, member, principal or
         affiliate thereof, except as may be required in connection with the
         cross default and cross collateralization of the Affiliate Loans;

                           (xv)     fail to file its own tax returns, if
         required under applicable law, or to use separate contracts, purchase
         orders, stationary, invoices and checks, except that Grantor may file a
         consolidated tax return with Agree Limited Partnership for reporting
         purposes;

                           (xvi)    fail either to hold itself out to the public
         as a legal entity separate and distinct from any other entity or person
         or to conduct its business solely in its own name in order not (1) to
         mislead others as to the entity with which such other party is
         transacting business, or (2) to suggest that Grantor is responsible for
         the debts of any third party (including any shareholder, partner,
         member, principal or affiliate of Grantor, or any shareholder, partner,
         member, principal or affiliate thereof);

                           (xvii)   fail to allocate fairly and reasonably among
         Grantor and any third party (including, without limitation, any
         Guarantor) any overhead for common employees, shared office space or
         other overhead and administrative expenses;

                           (xviii)  allow any person or entity to pay the
         salaries of its own employees or fail to maintain a sufficient number
         of employees for its contemplated business operations;

                                                              Columbia, Maryland

                                       27



                           (xix)    fail to maintain adequate capital for the
         normal obligations reasonably foreseeable in a business of its size and
         character and in light of its contemplated business operations;

                           (xx)     share any common logo with or hold itself
         out as or be considered as a department or division of (1) any
         shareholder, partner, principal, member or affiliate of Grantor, (2)
         any affiliate of a shareholder, partner, principal, member or affiliate
         of Grantor, or (3) any other person or entity or allow any person or
         entity to identify the Grantor as a department or division of that
         person or entity; or

                           (xxi)    conceal assets from any creditor, or enter
         into any transaction with the intent to hinder, delay or defraud
         creditors of the Grantor or the creditors of any other person or
         entity.

         23.      TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It
is understood by Grantor that time is of the essence hereof in connection with
all obligations of Grantor herein, in the Grantor's Guaranty, the Assignment,
and any of the other Loan Documents.

         Lender, at its sole option, may declare the Loan, as well as all other
monies secured or evidenced hereby or by any of the other Loan Documents,
including, without limitation, all Prepayment Premiums (to the extent permitted
by the Laws of the State) and late payment charges, to be in default and
forthwith due and payable, in the event:

                           (1)      Borrower or Grantor defaults in the payment
         of any monthly installment of the Note or the Grantor's Guaranty,
         whether of principal or interest, or both, or in the payment of any
         other sums of money referred to herein or in the Note, Grantor's
         Guaranty, or in any of the other Loan Documents, or in any of the
         documents evidencing, guarantying, or securing the repayment of the
         Affiliate Loans, including, but not limited to, that certain Indemnity
         Deed of Trust and Security Agreement executed by the Grantor as a
         second priority lien on the Deed of Trust Property to secure its
         cross-default guaranty of the Affiliate Loans (collectively, the
         "AFFILIATE LOAN DOCUMENTS"), promptly and fully when the same shall be
         due, without notice or demand from Lender to Grantor in regard to such
         Monetary Default (as hereinafter defined), and any such Monetary
         Default remains uncured for a period of five (5) days after Written
         Notice thereof has been given by Lender to Grantor, unless Lender has
         previously given Grantor such Written Notice for a failure to pay in
         the then-current Loan Year (as defined in the Note), in which event no
         such notice need be given and no right to cure need be afforded Grantor
         as to any further Monetary Default during such Loan Year.

                                                              Columbia, Maryland

                                       28



                           (2)      Borrower or Grantor breaches or defaults on
         any of the terms, covenants, conditions and agreements of the Note, the
         Grantor's Guaranty, this Deed of Trust, or any other Loan Documents or
         any of the Affiliate Loan Documents; or in the event that each and
         every one of said terms, covenants, conditions and agreements is not
         otherwise either duly, promptly and fully discharged or performed, and
         any such Non-Monetary Default (as hereinafter defined) remains uncured
         for a period of thirty (30) days after Written Notice thereof has been
         delivered from Lender to Grantor; unless such Non-Monetary Default
         cannot be cured within said thirty (30) day period, in which event
         Borrower or Grantor shall have a reasonable period of time to complete
         cure, provided that action to cure such Non-Monetary Default is
         promptly commenced within said thirty (30) day period, and Grantor is,
         in Lender's sole judgment, not diminishing or impairing the value of
         the Property, and is diligently pursuing a cure to completion, but in
         no event longer than ninety (90) days.

                           (3)      Any representation or warranty of Borrower
         or Grantor or their respective members, general partners, principals,
         affiliates, agents or employees, or of any Guarantor made herein or in
         or in any other Loan Document or any of the Affiliate Loan Documents,
         in any guaranty, or in any certificate, report, financial statement or
         other instrument or document furnished to Lender shall have been false
         or misleading in any material respect when made.

                           (4)      Any seizure or forfeiture of the Property,
         or any portion thereof, or Grantor's interest therein, resulting from
         criminal wrongdoing or other unlawful action of Grantor, its
         affiliates, or any tenant in the Property under any federal, state or
         local law.

                           (5)      If Grantor consummates a transaction which
         would cause this Deed of Trust or Lender's exercise of its rights under
         this Deed of Trust, the Note, the Grantor's Guaranty, or the other Loan
         Documents to constitute a nonexempt prohibited transaction under ERISA
         or result in a violation of a state statute regulating governmental
         plans, subjecting Lender to liability for a violation of ERISA or a
         state statute.

                           (6)      Any default occurs in the performance of any
         covenant or obligation of Borrower or Grantor or any other party under
         any indemnity or guaranty delivered to Lender in connection with the
         Loan and such default continues beyond the expiration of applicable
         notice and cure periods.

                           (7)      Any default occurs under the Affiliate Loans
         which default continues beyond the expiration of applicable notice and
         cure periods.

                                                              Columbia, Maryland

                                       29



         Upon the occurrence of any one of the above events, and at the option
of Lender, the principal of and the interest accrued on the Loan and all other
sums secured by this Deed of Trust and the other Loan Documents shall
immediately become due and payable as if all of said sums of money were
originally stipulated to be paid on such day. In addition, Lender may avail
itself of all rights and remedies provided by law or equity, and may foreclose
or prosecute a suit at law or in equity as if all monies secured hereby had
matured prior to its institution, anything in this Deed of Trust or any of the
other Loan Documents to the contrary notwithstanding. Lender shall have no
obligation to give Grantor notice of, or any period to cure, any Monetary
Default or any Incurable Default (as hereinafter defined) prior to exercising
its rights, powers, privileges and remedies.

         As used herein, the term "MONETARY DEFAULT" shall mean any default
which can be cured by the payment of money such as, but not limited to, the
payment of principal and interest due under the Note and Grantor's Guaranty, or
the payment of taxes, assessments and insurance premiums when due as provided in
this Deed of Trust. As used herein, the term "NON-MONETARY DEFAULT" shall mean
any default that is not a Monetary Default or an Incurable Default. As used
herein, the term "INCURABLE DEFAULT" shall mean either: (i) any voluntary or
involuntary sale, assignment, mortgaging, encumbering or transfer in violation
of the covenants contained herein or any of the other Loan Documents; or (ii) if
Borrower or Grantor, or any person or entity comprising Borrower or Grantor or
any guarantor or indemnitor of the Loan, should breach any of the provisions of
Section 22.

         24.      FORECLOSURE. Upon the occurrence of a default hereunder,
Lender may institute an action to foreclose this Deed of Trust as to the amount
so declared due and payable, and thereupon the Property (or any portion thereof)
shall be sold according to law to satisfy and pay the same, together with all
costs, expenses and allowances thereof, including, without limitation,
Reasonable Attorneys' Fees. The Property may be sold in one parcel, several
parcels or groups of parcels, and Lender shall be entitled to bid at the sale,
and, if Lender is the highest bidder for the Property or any part or parts
thereof, Lender shall be entitled to purchase the same. The failure or omission
on the part of Lender to exercise the option for acceleration of maturity of the
Note and foreclosure of this Deed of Trust following any default as aforesaid or
to exercise any other option or remedy granted hereunder to Lender when entitled
to do so in any one or more instances, or the acceptance by Lender of partial
payment of the Loan, whether before or subsequent to Grantor's default
hereunder, shall not constitute a waiver of any such default or the right to
exercise any such option or remedy, but such option or remedy shall remain
continuously in force. Acceleration of the maturity of the Note, once claimed
hereunder by Lender, at the option of Lender, may be rescinded by written
acknowledgment to that effect by Lender, but the tender and acceptance of
partial payments alone shall not in any way either affect or rescind such
acceleration of maturity, nor act as a waiver, accord and satisfaction,
modification, novation or similar defense.


                                                              Columbia, Maryland

                                       30


         25.      UCC REMEDIES.

                  (a)      This Deed of Trust constitutes a Security
Agreement under the UCC with respect to any part of the Property that may or
might now or hereafter be or be deemed to be personal property, fixtures or
property other than real estate, 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:

                           (1)      No financing statement covering any of the
         Property or any proceeds thereof is on file in any public office; and
         Borrower will, at its cost and expense, upon demand, furnish to Lender
         such further information and will execute and deliver to Lender such
         financing statements and other documents in form reasonably
         satisfactory to Lender and will do all such acts and things as Lender
         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 Property as security for the Loan,
         subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or
         desirable;

                           (2)      The terms and provisions contained in this
         section and in Section 25(b) of this Deed of Trust shall, unless the
         context otherwise requires, have the meanings and be construed as
         provided in the UCC;

                           (3)      This Deed of Trust constitutes a security
         agreement and financing statement under the UCC with respect to the
         Property. As such, this Deed of Trust covers any portion of the
         Property that is personal property including all items which are to
         become fixtures. Borrower is the "Debtor" and Lender is the "Secured
         Party" (as those terms are defined and used in the UCC) insofar as this
         Deed of Trust constitutes a financing statement.

                  (b) Upon the occurrence of a default, Lender may exercise its
rights of enforcement with respect to the Fixtures and Personal Property under
the UCC, and in conjunction with, in addition to or in substitution for those
rights and remedies:

                           (1)      Written Notice mailed to Grantor as provided
         herein ten (10) days prior to the date of public sale of the Fixtures
         and Personal Property or prior to the date after which private sale of
         the Fixtures and Personal Property will be made shall constitute
         reasonable notice;

                           (2)      any sale made pursuant to the provisions of
         this Section shall be deemed to have been a public sale conducted in a
         commercially reasonable manner if held contemporaneously with the sale
         of the Deed of Trust Property under power of sale as provided herein
         upon giving the same notice with respect to the sale of the

                                                              Columbia, Maryland

                                       31



         Fixtures and Personal Property hereunder as is required for such sale
         of the Deed of Trust Property under power of sale;

                           (3)      in the event of a foreclosure sale, whether
         made under the terms hereof, or under judgment of a court, the Fixtures
         and Personal Property and the Deed of Trust Property may, at the option
         of Lender, be sold as a whole;

                           (4)      it shall not be necessary that Lender take
         possession of the Fixtures and Personal Property or any part thereof
         prior to the time that any sale pursuant to the provisions of this
         Section is conducted and it shall not be necessary that the Fixtures
         and Personal Property or any part thereof be present at the location of
         such sale;

                           (5)      prior to application of proceeds of
         disposition of the Fixtures and Personal Property to the secured
         indebtedness, such proceeds shall be applied to the reasonable expenses
         of retaking, holding, preparing for sale or lease, selling, leasing and
         the like and the Reasonable Attorneys' Fees and other legal expenses
         incurred by Lender;

                           (6)      any and all statements of fact or other
         recitals made in any bill of sale or assignment or other instrument
         evidencing any foreclosure sale hereunder as to nonpayment of the
         indebtedness or as to the occurrence of any default, or as to Lender
         having declared all of such indebtedness to be due and payable, or as
         to notice of time, place and terms of sale and of the properties to be
         sold having been duly given, or as to any other act or thing having
         been duly done by Lender, shall be taken as prima facie evidence of the
         truth of the facts so stated and recited;

                           (7)      Lender may appoint or delegate any one or
         more persons as agent to perform any act or acts necessary or incident
         to any sale held by Lender, including the sending of notices and the
         conduct of the sale, but in the name and on behalf of Lender; and

                           (8)      this Deed of Trust covers Goods which are or
         are to become Fixtures related to the Real Property, and covers
         As-Extracted Collateral related to the Real Property. A carbon,
         photographic or other reproduction of this Deed of Trust or of any
         financing statement relating to this Deed of Trust shall be sufficient
         as a financing statement. This Deed of Trust shall be effective as a
         financing statement filed as a fixture filing with respect to all
         fixtures included within the Property and is to be filed for record in
         the real estate records in the Office of the County Clerk where the
         Property (including said fixtures) is situated. This Deed of Trust
         shall also be effective as a financing statement As-Extracted
         Collateral with respect to all As-Extracted Collateral included within
         the Real Property (including, without limitation, all oil, gas,

                                                              Columbia, Maryland

                                       32



         other minerals, and other substances of value which may be extracted
         from the earth and all accounts arising out of the sale at the wellhead
         or minehead thereof), and is to be filed for record in the real estate
         records of the county where the Property is situated. The mailing
         address of Grantor is set forth in Section 43 of this Deed of Trust and
         the address of Lender from which information concerning the security
         interest may be obtained is the address of Lender set forth in Section
         43 of this Deed of Trust.

         26.      PROTECTION OF LENDER'S SECURITY. At any time after default
hereunder, Lender, or Lender's agents or contractors, is authorized, without
notice and in Lender's sole discretion, to enter upon and take possession of the
Property or any part thereof, and to perform any acts which Lender deems
necessary or proper to conserve the security interest herein intended to be
provided by the Property, to operate any business or businesses conducted
thereon, and to collect and receive all Rents thereof and therefrom, including
those past due as well as those accruing thereafter.

         27.      APPOINTMENT OF RECEIVER. If, at any time after a default
hereunder, Lender deems, in Lender's sole discretion, that a receivership may be
necessary to protect the Property or its Rents, whether before or after maturity
of the Note and whether before or at the time of or after the institution of
foreclosure or suit to collect the Loan or to enforce this Deed of Trust or any
of the other Loan Documents, Lender, as a matter of strict right and regardless
of the value of the Property or the amounts due hereunder or secured hereby, or
of the solvency of any party bound for the payment of such indebtedness, shall
have the right, upon ex parte application and without notice to anyone, and by
any court having jurisdiction, to the appointment of a receiver to take charge
of, manage, preserve, protect and operate the Property, to collect the Rents
thereof, to make all necessary and needful repairs, and to pay all taxes,
assessments, insurance premiums and other such charges against and expenses of
the Property, and to do such other acts as may by such court be authorized and
directed, and after payment of the expenses of the receivership and the
management of the Property, to apply the net proceeds of such receivership in
reduction of the Loan or in such other manner as the said court shall direct
notwithstanding the fact that the amount owing thereon may not then be due and
payable or the said Loan is otherwise adequately secured. Such receivership
shall, at the option of Lender, continue until full payment of all sums hereby
secured or until title to the Property shall have passed by sale under this Deed
of Trust. Grantor hereby specifically waives its right to object to the
appointment of a receiver as aforesaid, and hereby expressly agrees that such
appointment shall be made as an admitted equity and as a matter of absolute
right to Lender.

         28.      RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The
rights and remedies herein provided are cumulative, and Lender, as the holder of
the Note and the Grantor's Guaranty and of every other obligation secured
hereby, may recover judgment thereon, issue execution therefor and resort to
every other right or remedy available at law or in equity, without first
exhausting any right or remedy available to

                                                              Columbia, Maryland

                                       33



Lender and without affecting or impairing the security of any right or remedy
afforded hereby, and no enumeration of special rights or powers by any
provisions hereof shall be construed to limit any grant of general rights or
powers, or to take away or limit any and all rights granted to or vested in
Lender by law or equity. Grantor further agrees that no delay or omission on the
part of Lender to exercise any rights or powers accruing to it hereunder shall
impair any such right or power, or shall be construed to be a waiver of any such
default hereunder or an acquiescence therein; and every right, power and remedy
granted herein or by law or equity to Lender may be exercised from time to time
as often as Lender deems expedient.

         Lender may resort to any security given by this Deed of Trust or to any
other security now existing or hereafter given to secure the payment of the
Loan, in whole or in part, and in such portions and in such order as may seem
best to Lender in its sole discretion, and any such action shall not be
considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Deed of Trust. To the full extent Grantor may do so,
Grantor agrees that Grantor will not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force pertaining to
the rights and remedies of sureties or providing for any appraisement,
valuation, stay, extension or redemption, and Grantor, for Grantor and Grantor's
heirs, devisees, representatives, successors and assigns, and for any and all
persons ever claiming any interest in the Property, to the extent permitted by
law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the secured indebtedness, notice of election to mature or declare
due the whole of the secured indebtedness and all rights to a marshaling of the
assets of Grantor, including the Property, or to a sale in inverse order of
alienation in the event of foreclosure of the liens and security interests
hereby created. Grantor shall not have or assert any right under any statute or
rule of law pertaining to the marshaling of assets, sale in inverse order of
alienation, the exemption of homestead, the administration of estates of
decedents or other matters whatever to defeat, reduce or affect the right of
Lender under the terms of this Deed of Trust to a sale of the Property for the
collection of the secured indebtedness without any prior or different resort for
collection, or the right of Lender under the terms of this Deed of Trust to the
payment of such indebtedness out of the proceeds of sale of the Property in
preference to every other claimant whatever. If any law referred to in this
Section and now in force, of which Grantor or Grantor's heirs, devisees,
representatives, successors and assigns and such other persons claiming any
interest in the Property might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not thereafter be
deemed to preclude the application of this Section.

         29.      MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without
notice and without regard to the consideration, if any, paid therefor, and
notwithstanding the existence at that time of any inferior mortgages, deeds of
trust, or other liens thereon, may release any part of the security described
herein, or may release any person or entity liable for the Loan without in any
way affecting the priority of this Deed of Trust, to the full extent of the Loan
remaining unpaid hereunder, upon any part of the security not

                                                              Columbia, Maryland

                                       34



expressly released. Lender may, at its option and within Lender's sole
discretion, also agree with any party obligated on the Loan, or having any
interest in the security described herein, to extend the time for payment of any
part or all of the Loan, and such agreement shall not, in any way, release or
impair this Deed of Trust, but shall extend the same as against the title of all
parties having any interest in said security, which interest is subject to this
Deed of Trust.

         30.      PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the
Property shall be Grantor, or such other manager as may be first approved in
writing by Lender. The exclusive leasing agent of the Property, if other than
Grantor or the foregoing party, shall be first approved in writing by Lender.
The management and leasing contracts (or in the absence of any such written
contract, a letter so stating and further identifying the name of the person or
entity charged with the responsibility for managing and/or leasing the Property)
shall be subordinate to this Deed of Trust, and satisfactory to and subject to
the prior written approval of Lender throughout the term of the Loan. Upon
default in either of these requirements, then the whole of the Loan hereby
secured shall, at the election of Lender, become immediately due and payable,
together with any Prepayment Premium, late payment charges and all other sums
required by the Note or the other Loan Documents, and Lender shall be entitled
to exercise any or all remedies provided for or referenced in this Deed of
Trust.

         31.      MODIFICATION NOT A WAIVER. In the event Lender (a) releases,
as aforesaid, any part of the security described herein or any person or entity
liable for the Loan; (b) grants an extension of time for the payment of the
Note; (c) takes other or additional security for the payment of the Note or the
Grantor's Guaranty; or (d) waives or fails to exercise any rights granted
herein, in the Note or the Grantor's Guaranty, or any of the other Loan
Documents, any said act or omission shall not release Grantor, subsequent
purchasers of the Property or any part thereof, or makers, sureties, endorsers
or guarantors of the Note, if any, from any obligation or any covenant of this
Deed of Trust, the Note, the Grantor's Guaranty, or any of the other Loan
Documents, nor preclude Lender from exercising any right, power or privilege
herein granted or intended to be granted in the event of any other default then
made, or any subsequent default.

         32.      TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER OR
GRANTOR; ASSUMPTION. Except as set forth in Section 38(b) hereof, without the
prior written consent of Lender, the sale, transfer, assignment or conveyance of
all or any portion of the Property, or the transfer, assignment or conveyance of
a controlling interest in Borrower or Grantor or their respective general
partners or managing members, or any guarantor, whether voluntary or by
operation of law, without the prior written consent of Lender, shall constitute
a default hereunder, and entitle Lender, at Lender's sole option, to accelerate
all sums due on the Note and the Grantor's Guaranty, together with any
Prepayment Premiums (to the extent permitted by the Laws of the State), late
payment charges or any other amounts secured hereby. Lender may, however, elect
to waive the option to

                                                              Columbia, Maryland

                                       35



accelerate granted hereunder if, prior to any such sale, transfer, assignment or
conveyance of the Property, the following conditions shall be fully satisfied:
(a) Lender acknowledges in writing that, in Lender's sole discretion, the
creditworthiness of the proposed transferee and the ability and experience of
the proposed transferee to operate the Property are satisfactory to Lender, (b)
Lender and the proposed transferee shall enter into an agreement in writing that
(i) the rate of interest payable on the Loan shall be at such rate as Lender
shall determine, (ii) the repayment schedule as set forth in the Note shall be
modified by Lender, in Lender's sole discretion, to initiate amortization or
modify the existing amortization schedule in order to amortize the then
remaining unpaid principal balance of the Note over a period of time as
determined by Lender, in Lender's sole discretion, without a change in the
maturity date of the Note, and (iii) the proposed transferee shall assume all
obligations of Borrower and Grantor under the Note, the Grantor's Guaranty, this
Deed of Trust and the other Loan Documents in writing and an assumption fee, to
be determined by Lender in Lender's sole discretion, may be charged by Lender;
(c) Lender shall receive, for Lender's review and approval, copies of all
transfer documents; and (d) Grantor or the transferee shall pay all costs and
expenses in connection with such transfer and assumption, including, without
limitation, all fees and expenses incurred by Lender.

         Grantor, or any subsequent owner of the Property or any portion
thereof, shall do all things necessary to preserve and keep in full force and
effect its and their legal existence, franchises, rights and privileges as a
corporation, partnership or limited liability company, as the case may be, under
the laws of the State of its formation and its right to own property and
transact business in the State. It shall be a default hereunder if Grantor, or
any subsequent owner of the Property or any portion thereof, shall amend,
modify, transfer, assign or terminate the applicable governing documents for
such entity, including its partnership agreement, certificate of partnership,
operating agreement, articles of organization, regulations, articles of
incorporation or bylaws, as the case may be (as applicable, the "GOVERNING
DOCUMENTS"), of Grantor or such subsequent owner without the prior written
consent of Lender. Grantor, or such subsequent owner of the Property, shall
provide Lender with copies of any proposed amendment to its applicable Governing
Documents, so that Lender may, in Lender's sole discretion, determine whether
such amendment adversely affects Lender, the Property or the security value
thereof. Provided, however, that any amendment, modification, transfer,
assignment or termination of Grantor's applicable Governing Documents or any
other action pursuant to which the current general partner or managing member of
Grantor shall either: (i) cease to be the general partner or managing member of
Grantor; or (ii) except to the extent permitted herein, cease to own or maintain
a partnership or membership interest in Grantor equal to or greater than its
partnership or membership interest at the time this Deed of Trust is executed,
shall be deemed to have a material adverse effect upon Lender and the Property,
and shall be a default hereunder.

         Grantor shall not change its name or identity in any manner which may
make any financing or continuation statement filed in connection with the Loan
seriously misleading

                                                              Columbia, Maryland

                                       36



within the meaning of the UCC enacted in the State or change its jurisdiction of
organization unless Grantor shall have delivered to Lender written notice
thereof not less than 30 days before the effective date of such change and shall
have taken all action which Lender determines to be reasonably necessary or
desirable to confirm and protect Lender's security interests and rights under
this Deed of Trust and the perfection and priority thereof. Grantor will not
change its principal places of business unless it shall have given Lender prior
written notice of its intent to do so not less than thirty (30) days in advance
of the effective date of such change. Grantor shall bear all costs incurred by
Lender in connection with any such change including, without limitation,
Reasonable Attorney's Fees.

         In the event the ownership of the Property, or any part thereof, shall
become vested in a person or entity other than Grantor, whether with or without
the prior written consent of Lender, Lender may, without notice to Grantor, deal
with such successor or successors in interest with reference to the Property,
this Deed of Trust and the other Loan Documents, in the same manner and to the
same extent as with Grantor without in any way vitiating or discharging
Grantor's liability hereunder or under any of the Loan Documents. No sale,
transfer or conveyance of the Property, no forbearance on the part of Lender and
no extension of time given by Lender to Grantor for the payment of the Note and
the Grantor's Guaranty shall operate to release, discharge, modify, change or
affect the original liability of Grantor, either in whole or in part, unless
expressly set forth in writing executed by Lender. Notwithstanding anything
contained herein to the contrary, Grantor hereby waives any right it now has or
may hereafter have to require Lender to prove an impairment of its security as a
condition to the exercise of Lender's rights under this Section 32.

         A sale, transfer, assignment or conveyance within the meaning of this
Section shall be deemed to include, but not be limited to, (a) an installment
sales agreement wherein Grantor agrees to sell the Property or any part thereof
for a price to be paid in installments; (b) an agreement by Grantor leasing all
or a substantial part of the Property for other than actual occupancy by a
tenant under an Occupancy Lease or a sale, assignment or other transfer of, or
the grant of a security interest in, Grantor's right, title and interest in and
to any leases or any Rents; (c) if Grantor, any guarantor, any indemnitor, or
any general partner or managing member of Grantor, is a corporation, the
voluntary or involuntary sale, conveyance, transfer or pledge of such
corporation's stock (or the stock of any corporation directly or indirectly
controlling such corporation by operation of law or otherwise), or the creation
or issuance of new stock by which an aggregate of more than ten percent (10%) of
such corporation's stock shall be vested in a party or parties who are not now
stockholders; and (d) if Grantor, any guarantor, indemnitor, or any general
partner or managing member of Grantor, is a limited partnership, general
partnership, limited liability partnership, limited liability company, or joint
venture, the change, removal or resignation of a general partner, managing
partner, or member, or the transfer or pledge of the interest of any general
partner, managing partner, or member or any profits or proceeds relating to such
interest. Nothing in this Deed of Trust shall be construed to limit or restrict
the transfer of shares of Agree Realty Corporation.

                                                              Columbia, Maryland

                                       37



         Notwithstanding anything contained in this Section 32 to the contrary,
as long as no default, or event which, with notice or the passage of time or
both, could result in a default, has occurred hereunder, under the Note, the
Grantor's Guaranty, or any of the other Loan Documents, Lender shall permit one
(1) bona fide arm's length transfer of the Property to another borrowing entity
without a change in the terms of the Loan; provided, however, that no such
transfer shall be valid or permitted hereunder unless: (i) Lender receives prior
Written Notice of such proposed transfer; (ii) such proposed transferee and any
substitute guarantor has been approved in writing by Lender (taking into
consideration such factors as transferee's creditworthiness, business
experience, financial condition and managerial capabilities); (iii) the
transferee's (and its sole general partner's or managing member's) single
purpose and bankruptcy remote character are satisfactory to Lender in its sole
discretion; (iv) Lender has obtained such other legal opinions regarding
substantive consolidation issues, enforceability of the assumption documents, no
adverse impact on the Securities or any REMIC holding the Note and the Grantor's
Guaranty and similar matters as Lender may require, (v) the execution and
delivery to Lender of a written assumption agreement covering the Note, the
Grantor's Guaranty, this Deed of Trust, and the other Loan Documents and/or
substitute guaranty (in Lender's sole and absolute discretion) and such
modifications to the Loan Documents executed by such parties and containing such
terms and conditions as Lender may require in its sole and absolute discretion
prior to such sale or transfer (provided that in the event the Loan is included
in a REMIC and are performing Loan, no modification to the terms and conditions
shall be made or permitted that would cause (A) any adverse tax consequences to
the REMIC or any holders of any Deed of Trust-Backed Pass-Through Securities,
(B) this Deed of Trust to fail to be a Qualifying Security Instrument under
applicable federal law relating to REMIC's, or (C) result in a taxation of the
income from the Loan to the REMIC or cause a loss of REMIC status), (vi) if
applicable, the delivery to Lender of an endorsement (at Grantor's sole cost and
expense) to Lender's policy of title insurance then insuring the lien created by
this Deed of Trust in form and substance acceptable to Lender in its sole
judgment; (vii) Lender is paid a cash assumption fee in accordance with the
following schedule: Two percent (2%) of the then outstanding principal balance
of the Note if such outstanding principal balance is less than or equal to Three
Million Dollars ($3,000,000.00), one and one-half percent (1 1/2%) of the then
outstanding principal balance of the Note if such outstanding principal balance
is in excess of Three Million Dollars ($3,000,000.00); (viii) Grantor pays all
fees and expenses incurred by Lender in connection with such transfer and
assumption, including, without limitation, inspection and investigation fees,
title insurance charges, and Reasonable Attorneys' Fees; (ix) Lender approves
the management agreement and leasing agreement, and the management and leasing
company to be employed by the proposed transferee; and (x) the transferee is
simultaneously purchasing each of the Properties which secure the Affiliate
Loans, to the extent such Affiliate Loans remain outstanding. Any transfer of
all or any portion of the Property which does not strictly comply with the terms
and conditions of the foregoing shall be a default hereunder, and shall entitle
Lender to exercise all rights and remedies provided in this

                                                              Columbia, Maryland

                                       38



Deed of Trust and the other Loan Documents. This one-time right of transfer
shall apply to the Grantor named herein and not to any subsequent owner of the
Property.

         33.      FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the
Note and the Grantor's Guaranty remain unpaid, Grantor shall not, either
voluntarily or involuntarily, permit the Property or any part thereof to become
subject to any secondary or subordinate lien, mortgage, deed of trust, security
interest or encumbrance of any kind whatsoever without the prior written consent
of Lender, and the imposition of any such secondary lien, mortgage, deed of
trust, security interest or encumbrance without the approval of Lender shall
constitute a default hereunder, and entitle Lender, at Lender's sole option, to
declare the outstanding principal balance of the Note, all accrued and unpaid
interest thereon, Prepayment Premiums (to the extent permitted by the laws of
the State, late payment charges and any other amounts secured hereby to be and
become immediately due and payable in full. In the event that Lender shall
hereafter give its written consent to the imposition of any such secondary lien,
mortgage, deed of trust, security interest or other encumbrance upon the
Property, Lender, at Lender's sole option, shall be entitled to accelerate the
maturity of the Note and the Grantor's Guaranty and exercise any and all
remedies provided and available to Lender hereunder and in the other Loan
Documents in the event that the holder of any such secondary lien or encumbrance
shall institute foreclosure or other proceedings to enforce the same; it being
understood and agreed that a default under any instrument or document
evidencing, securing or secured by any such secondary lien or encumbrance shall
be and constitute a default hereunder. In the event all or any portion of the
proceeds of the Loan are used for the purpose of retiring debt or debts secured
by prior liens on the Property, Lender shall be subrogated to the rights and
lien priority of the holder or holders of the lien or liens so discharged.

         34.      CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Grantor agrees that
the making of any oil, gas or mineral lease, or the sale or conveyance of any
mineral interest or right to explore for minerals under, through or upon the
Property, would impair the value of the Property, and that Grantor shall have no
right, power or authority to lease the Property, or any part thereof, for oil,
gas or other mineral purposes, or to grant, assign or convey any mineral
interest of any nature, or the right to explore for oil, gas and other minerals,
without first obtaining Lender's express written permission therefor, which
permission shall not be valid until recorded among the Land Records of the
county in which the Property is located. Grantor further agrees that if Grantor
shall make, execute, or enter into any such lease or attempt to grant any such
mineral rights without such prior written permission of Lender, then Lender
shall have the option, without notice, to declare the same to be a default
hereunder, and to declare the Loan immediately due and payable in full. Whether
or not Lender shall consent to such lease or grant of mineral rights, Lender
shall receive the entire consideration to be paid for any such lease or grant of
mineral rights, with the same to be applied to the Loan notwithstanding the fact
that the amount owing thereon may not then be due and payable or that the Loan
is otherwise adequately secured; provided, however, that the

                                                              Columbia, Maryland

                                       39



acceptance of such consideration shall in no way impair the lien of this Deed of
Trust on the Property or cure any existing Monetary Default.

         35.      ESTOPPEL CERTIFICATION BY GRANTOR. Grantor, upon request of
Lender therefor made either personally or by mail, shall certify in writing to
Lender (or any party designated by Lender), in a form satisfactory to Lender or
such designee, the amount of principal and interest then outstanding under the
terms of the Note and the Grantor's Guaranty and any other sums due and owing
under this Deed of Trust or any of the other Loan Documents, and whether any
offsets or defenses exist against the Loan. Such certification shall be made by
Grantor within ten (10) days if the request is made personally, or within twenty
(20) days if the request is made by mail.

         36.      CROSS-DEFAULT. The Note is also secured by the terms,
conditions and provisions of the Assignment, by three Cross-Default Guaranty
Agreements of even date herewith from Agree - Milestone Center Project, L.L.C.,
a Delaware limited liability company, as guarantor for a loan made by Lender to
Agree-Milestone, Omaha, and Oklahoma City, respectively in favor of Lender
(hereinafter individually or collectively referred to as the "AFFILIATED-GRANTOR
CROSS-DEFAULT GUARANTYS") and, additionally, may be secured by contracts or
agreements of guaranty or other security instruments. The terms, covenants,
conditions and agreements of each security instrument shall be considered a part
hereof as fully as if set forth herein verbatim. Any default under this Deed of
Trust, any Affiliated Grantor Cross-Default Guaranty or any of the other Loan
Documents shall constitute a default hereunder and under each of the other Loan
Documents. Notwithstanding the foregoing, the enforcement or attempted
enforcement of this Deed of Trust or any of the other Loan Documents now or
hereafter held by Lender shall not prejudice or in any manner affect the right
of Lender to enforce any other Loan Document; it being understood and agreed
that Lender shall be entitled to enforce this Deed of Trust and any of the other
Loan Documents now or hereafter held by it in such order and manner as Lender,
in its sole discretion, shall determine.

         37.      EXAMINATION OF GRANTOR'S RECORDS. Grantor will maintain
complete and accurate books and records showing in detail the income and
expenses of the Property, and will permit Lender and its agents, contractors or
representatives to examine said books and records and all supporting vouchers
and data during normal business hours and from time to time upon request by
Lender, in such place as such books and records are customarily kept. Grantor
will furnish to Lender, within one hundred twenty (120) days after the close of
each respective fiscal period annual and quarterly financial statements (income
statements and a balance sheet) for the Grantor and the Property. Grantor will
furnish to Lender on or before 45 calendar days after the end of each calendar
quarter the following items, each certified by Grantor as being true and
correct, in such format and in such detail as Lender or its servicer may
request: (a) a written statement (rent roll) dated as of the last day of each
such calendar quarter identifying each of the Occupancy Leases by the term,
space occupied, rental required

                                                              Columbia, Maryland

                                       40



to be paid (including percentage rents and tenant sales), security deposit paid,
any rental concessions, all rent escalations, any rents paid more than one month
in advance, any special provisions or inducements granted to tenants, any taxes,
maintenance and other common charges paid by tenants, all vacancies and
identifying any defaults or payment delinquencies thereunder; and (b) quarterly
and year-to-date operating statements prepared for each calendar quarter during
each such reporting period detailing the total revenues received, total expenses
incurred, total cost of all capital improvements, total debt service and total
cash flow. These statements shall be in form acceptable to Lender and its
servicer, shall be prepared in accordance with generally accepted accounting
principles, and shall include a rent roll, certified as true and correct by
Grantor. The statements shall show in detail all income derived from and
expenses incurred in connection with the ownership of the Property, including
current annual sales figures for all Major Tenants of the Property if required
under the Major Tenant leases or if such financial information is otherwise
available. Grantor shall deliver to Lender, for Grantor, or any entity with whom
Grantor's tax return is consolidated, copies of all income tax returns, requests
for extension and other similar items contemporaneously with its delivery of
same to the Internal Revenue Service. In the event Grantor fails to provide such
statements to Lender within the time prescribed above, Grantor shall pay Lender
the sum of $200.00 in administrative expenses for each successive month for
which the statements are delinquent (or in the case of such statements to be
delivered prior to the transfer of the Loan to Investor (hereafter defined), for
each successive week for which the statements are delinquent). Upon a default
hereunder, Lender shall have the right to require that said financial statements
be audited and certified by a certified public accountant acceptable to Lender,
at the sole cost and expense of Grantor.

         Prior to the transfer of the Loan to Investor by Lender, Grantor shall
deliver to Lender the reports required above on a monthly basis. Such reports
shall be delivered within ten calendar days after the end of each calendar
month.

         In addition, at the request of Lender, but in no case more often than
once a quarter nor more than three (3) times during the term of the Loan, unless
a default has occurred, Grantor shall furnish to Lender (i) unaudited financial
statements (balance sheet, income statement, cash flow statement and current
rent roll) covering operation of the Property for periods other than those set
forth in the preceding paragraph and (ii) unaudited financial statements
(balance sheets, income statements, and cash flow statements) for Grantor, its
general partner(s), shareholder(s) or member(s) (whichever is applicable) and
for such other principals of Grantor as designated by Lender, provided that for
so long as the Property is held by Grantor such statements shall be required
only for Grantor and Agree Realty Corporation. All such statements shall be
certified to Lender to be complete, correct, and accurate by the individual (for
an individual's statements) or by an authorized representative of the entity (if
statements are for a partnership, corporation or limited liability company).

                                                              Columbia, Maryland

                                       41



         Any inspection or audit of the Property or the books and records of
Grantor, or the procuring of documents and financial and other information, by
or on behalf of Lender, shall be at Grantor's expense and shall be for Lender's
protection only, and shall not constitute any assumption of responsibility or
liability by Lender to Grantor or anyone else with regard to the condition,
construction, maintenance or operation of the Property, nor Lender's approval of
any certification given to Lender nor relieve Grantor of any of Grantor's
obligations.

         38.      ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED.
Grantor covenants and agrees to permit or suffer none of the following without
the prior written consent of Lender:

                  (a)      Any structural alteration of, or addition to, the
Improvements now or hereafter situated upon the Real Property, or the addition
of any new buildings or other structure(s) thereto, other than the erection or
removal of non-load bearing interior walls or as may be permitted under the
Borders Lease, so long as the Borders Lease remains in effect; or

                  (b)      The removal, transfer, sale or lease of the Property,
except that the removal, replacement or substitution of fixtures, equipment,
machinery, apparatus and articles of personal property (replacement or
substituted items must be of like or better quality than the removed items in
their original condition) encumbered hereby may be made in the normal course of
business; or

                  (c)      The use of any of the Improvements now or hereafter
situated on the Real Property for any purpose other than the Existing Use and
related facilities, or as may be permitted under the Borders Lease, so long as
the Borders Lease remains in effect.

         39.      FUTURE ADVANCES SECURED. This Deed of Trust shall secure not
only existing indebtedness, but also future advances, whether such advances are
obligatory or to be made at the option of Lender. Upon the request of Grantor,
and at Lender's option prior to release of this Deed of Trust, Lender may make
future advances to Grantor. All future advances with interest thereon shall be
secured by this Deed of Trust to the same extent as if such future advances were
made on the date of the execution of this Deed of Trust unless the parties shall
agree otherwise in writing, but the total secured indebtedness shall not exceed
at any one time a maximum principal amount equal to double the face amount of
the Note plus interest and costs of collection, including court costs and
Reasonable Attorneys' Fees. Any advances or disbursements made for the benefit
or protection of or the payment of taxes, assessments, levies or insurance upon
the Property, with interest on such disbursements as provided herein, shall be
added to the principal balance of the Note and collected as a part thereof. To
the extent that Grantor's Guaranty secured by this Deed of Trust may secure more
than one note, a default in the payment of any such mortgage note shall
constitute a default in the payment of all such Note.

                                                              Columbia, Maryland

                                       42



         40.      EFFECT OF SECURITY AGREEMENT. Grantor agrees to, and shall
upon the request of Lender, execute and deliver to Lender, in form and content
satisfactory to Lender, such financing statements, descriptions of property and
such further assurances as Lender, in Lender's sole discretion, may from time to
time consider necessary to create, perfect, continue and preserve the lien and
encumbrances hereof, and the security interest granted herein, upon and in the
Property. Without the prior written consent of Lender, Grantor shall not create
or suffer to be created, pursuant to the UCC, any other security interest in
such real and personal property and fixtures described herein. Upon the
occurrence of a default hereunder or Grantor's breach of any other covenants or
agreements between the parties entered into in conjunction herewith, Lender
shall have the remedies of a secured party under the UCC as provided in Section
25, and at Lender's option, the remedies provided for in this Deed of Trust and
the other Loan Documents. Lender, at the expense of Grantor, may cause such
statements, descriptions and assurances, as herein provided in this Section 40,
and this Deed of Trust, to be recorded and re-recorded, filed and refiled, at
such times and in such places as may be required or permitted by law to so
create, perfect and preserve the lien and encumbrance hereof upon all of the
Property.

         41.      TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions
of the Application for Deed of Trust Loan dated August 28, 2003, and any
subsequent amendments thereto (the "APPLICATION"), executed by and between
Grantor and Lender, are incorporated herein by reference. All terms, covenants,
conditions and agreements of the Application not expressly set forth in this
Deed of Trust and any of the other Loan Documents shall survive the execution
and delivery hereof, and remain in full force and effect. In the event any
conflict exists between the terms, covenants, conditions and agreements of the
Application and the Loan Documents, the terms, covenants, conditions and
agreements of the Loan Documents shall prevail.

         42.      SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof
shall be binding upon Grantor and the heirs, personal representatives, trustees,
successors and assigns of Grantor, and shall inure to the benefit of Lender, its
successors and assigns. Where more than one Grantor is named herein, the
obligations and liabilities of said Grantor shall be joint and several.

         Wherever used in this Deed of Trust, unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein:
(a) the word "Grantor" shall mean Grantor and/or any subsequent owner or owners
of the Property; (b) the word "Lender" shall mean Lender or any subsequent
holder or holders of this Deed of Trust; (c) the word "Note" shall mean the
Note(s) secured by this Deed of Trust; and (d) the word "person" shall mean an
individual, trustee, trust, corporation, partnership, limited liability
corporation, limited liability partnership, joint venture or unincorporated
association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean
fees charged by attorneys selected by Lender based upon such attorneys' then
prevailing hourly rates as opposed to any statutory presumption

                                                              Columbia, Maryland

                                       43



specified by any statute then in effect in the State. As used herein words of
any gender shall include all other genders.

         43.      NOTICES. All notices, reports, requests or other written
instruments required or permitted hereunder, shall be in writing, signed by the
party giving or making the same, and shall be sent hand-delivered, effective
upon receipt, sent by United States Express Mail or by a nationally recognized
overnight courier, effective upon receipt, or sent by United States registered
or certified mail, postage prepaid, with return receipt requested, deemed
effective on the earlier of the day of actual delivery as shown by the
addressee's return receipt or the expiration of three business days after the
date of mailing, addressed to the party intended to receive the same at the
address set forth below or at such other address as shall be given in writing by
any party to another ("WRITTEN NOTICE"):

         If to Grantor:    AGREE-COLUMBIA CROSSING PROJECT, LLC
                           31850 Northwestern Highway
                           Farmington Hills, Michigan 48334
                           Attention:  Mr. Richard Agree

         If to Lender:     NATIONWIDE LIFE INSURANCE COMPANY
                           One Nationwide Plaza
                           Columbus, Ohio  43215-2220
                           Attention:  Real Estate Investment Department, 34T

         44.      GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. GRANTOR AND
LENDER, EACH TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION,
AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR
ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION,
EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE
LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM
WHICH ANY PARTY MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS
BE LIABLE FOR ANY SPECIAL, INCIDENTAL,

                                                              Columbia, Maryland

                                       44



CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS
OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, GRANTOR WAIVES
ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Deed of Trust and the rights
and obligations of the parties hereunder shall be governed by, and construed in
accordance with, the internal laws of the State, without regard to principles of
conflicts of laws. The parties hereto irrevocably (a) agree that any suit,
action or other legal proceeding arising out of or relating to this Deed of
Trust may be brought in a court of record in the State or in the courts of the
United States of America located in such State, (b) consent to the non-exclusive
jurisdiction of each such court in any suit, action or proceeding, and (c) waive
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. If any clauses or
provisions herein contained operate, or would prospectively operate, to
invalidate this Deed of Trust, then such clauses or provisions only shall be
held for naught, as though not herein contained, and the remainder of this Deed
of Trust shall remain operative and in full force and effect.

         45.      RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising
under the terms, covenants, conditions and agreements contained in this Deed of
Trust shall be separate, distinct and cumulative, and none of them shall be in
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provisions,
anything herein or otherwise to the contrary notwithstanding. If Grantor is
comprised of more than one person or entity, then the liability of each such
person and entity hereunder shall be joint and several.

         46.      MODIFICATIONS. This Deed of Trust cannot be changed, altered,
amended or modified except by an agreement in writing and in recordable form,
executed by both Grantor and Lender.

         47.      EXCULPATION. Notwithstanding anything contained herein to the
contrary, the liability of Grantor is subject to the limited recourse provisions
contained in the Exculpation section of the Note, which are incorporated herein
and made a part hereof by reference as if fully set forth herein.

         48.      FULL RECOURSE. Notwithstanding any provisions in this Deed of
Trust to the contrary, including without limitation the provisions set forth in
the section captioned "Exculpation" hereinabove, Grantor shall be personally
liable, jointly and severally, for the entire Loan secured by this Deed of Trust
(including all principal, interest and other charges) in the event (a) Grantor
violates the covenant governing the placing of subordinate financing on the
Property as set forth in this Deed of Trust; (b) Grantor violates the covenant
restricting transfers of interests in the Property or transfers of ownership
interests in Grantor as set forth in this Deed of Trust; or (c) Grantor or any
guarantor violates the provisions of Section 22 of this Deed of Trust, or there
is filed against Grantor or any guarantor or indemnitor of the

                                                              Columbia, Maryland

                                       45



Loan, a petition in bankruptcy or for the appointment of a receiver, or there
commences under any bankruptcy or insolvency law, proceedings for Grantor's
relief, or for the compromise, extension, arrangement or adjustment of Grantor's
obligations which is not dismissed within thirty (30) days after the filing of
same.

         49.      LENDER IS NOT A JOINT VENTURER OR PARTNER. Grantor and Lender
acknowledge and agree that in no event shall Lender be deemed to be a partner or
joint venturer with Grantor or any member of Grantor. Without limitation of the
foregoing, Lender shall not be deemed to be a partner or joint venturer on
account of its becoming a mortgagee in possession or exercising any rights
pursuant to this Deed of Trust or pursuant to any other instrument or document
evidencing or securing any of the indebtedness secured hereby, or otherwise.

         50.      CAPTIONS. The captions set forth at the beginning of the
various Sections of this Deed of Trust are for convenience only, and shall not
be used to interpret or construe the provisions of this Deed of Trust.

         51.      TRUSTEES. Trustees hereby accept the trust created by this
Deed of Trust, upon the terms and subject to the conditions set forth herein,
including the following:

         Trustees assume no responsibility for and make no representations as to
(i) the description, identification or value of the Property or any part
thereof, (ii) the validity or sufficiency of the Loan Documents, (iii)
Borrower's or Grantor's present or future financial condition, or (iv) the
validity or collectibility of the Note or the Grantor's Guaranty.

         Trustees (i) may exercise their powers and perform their duties
hereunder either directly or by or through such attorneys, agents, servants as
they shall appoint, and (ii) shall not be answerable or liable (x) for the acts,
negligence or default of any such attorney, agent or servant which Trustees may
so appoint so long as the same are selected with care, or (y) for any act or
omission of Lender, or (z) for any other cause arising under this Deed of Trust
or otherwise, except for each such Trustee's own individual willful misconduct.

         Trustees, in their discretion may consult with legal counsel selected
and employed by Trustees, and Trustees shall incur no liability to Grantor,
Lender or to any other person by reason of any action taken, suffered or omitted
by Trustees in accordance with the opinion of such counsel.

         Trustees shall be under no obligation to sell the Property or any part
thereof upon a default hereunder, or to exercise any of the rights or powers
vested in Trustees by this Deed of Trust, except upon the written request or
direction of Lender and upon Lender furnishing security or an indemnity
satisfactory to Trustees against costs, expenses and liabilities incurred

                                                              Columbia, Maryland

                                       46



or which may be incurred by Trustees in selling the Property or in complying
with such request or direction.

         At any time that more than one person is acting as Trustee hereunder,
the powers vested in Trustees may be exercised by either Trustee acting
individually in the event of the unavailability of the other Trustee. Any person
acting as Trustee hereunder may resign as Trustee upon written notice to the
Lender.

         Lender may remove Trustees at any time or from time to time for any
reason (with or without cause) and appoint a successor trustee or trustees, and
upon such appointment, all powers, rights, duties and authority of Trustees, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall be appointed by written instrument duly recorded in the county or
counties where the Property covered hereby is located, which appointment may be
executed by any authorized agent of Lender or in any other manner permitted by
applicable law.

         52.      SPLITTING OF DEED OF TRUST. This Deed of Trust and the Note
and the Grantor's Guaranty, shall, at any time until the same shall be fully
paid and satisfied, at the sole election of Lender, be split or divided into two
or more notes and two or more security instruments, each of which shall cover
all or a portion of the Property to be more particularly described therein. To
that end, Grantor, upon written request of Lender, shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered by the then
owner of the Property, to Lender and/or its designee or designees substitute
notes and security instruments in such principal amounts, aggregating not more
than the then unpaid principal amount of Loan, and containing terms, provisions
and clauses similar to those contained herein and in the Note and the Grantor's
Guaranty, and such other documents and instruments as may be required by Lender.

         53.      REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note,
the Grantor's Guaranty or any other Loan Document which is not of public record,
and, in the case of any such mutilation, upon surrender and cancellation of such
Note, the Grantor's Guaranty, or other Loan Document, Grantor, at its expense,
will issue or cause to be issued, in lieu thereof, a replacement Note, the
Grantor's Guaranty, or other Loan Document, dated the date of such lost, stolen,
destroyed or mutilated Note, Grantor's Guaranty, or other Loan Document in the
same principal amount thereof and otherwise of like tenor.

         54.      SOLE DISCRETION OF LENDER. Wherever pursuant to this Deed of
Trust Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide that arrangements or terms are satisfactory
or not satisfactory shall be in the sole discretion of

                                                              Columbia, Maryland

                                       47



Lender and shall be final and conclusive, except as may be otherwise expressly
and specifically provided herein.

         55.      TRANSFER OF LOAN.

                  (a)      Lender may, at any time, sell, transfer or assign the
Note, the Grantor's Guaranty, this Deed of Trust, the Assignment and the other
Loan Documents, and any or all servicing rights with respect thereto, or grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "SECURITIES"), or otherwise sell the Loan or
an interest therein (a "SECONDARY MARKET TRANSACTION"). Lender may forward to
each purchaser, transferee, assignee, servicer, participant, investor in such
Securities or in connection with a Secondary Market Transaction or any Rating
Agency rating such Securities (collectively, the "INVESTOR") and each
prospective Investor, all documents and information which Lender now has or may
hereafter acquire relating to the Loan and to Borrower, Grantor, any Guarantor
and the Property, whether furnished by Borrower, Grantor, any Guarantor or
otherwise, as Lender determines necessary or desirable. Grantor acknowledges
that certain information regarding the Loan and the parties thereto and the
Property may be included in a private placement memorandum, prospectus or other
disclosure documents. The term "RATING AGENCY" shall mean each statistical
rating agency that has assigned a rating to the Securities.

                  (b)      Grantor shall cooperate in good faith with Lender in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements reasonably imposed by the participants
involved in any Secondary Market Transaction (including without limitation, a
Rating Agency and/or an Investor) including, without limitation, all structural
or other changes to the Loan, modifications to any documents evidencing or
securing the Loan, delivery of opinions of counsel acceptable to the Rating
Agency or such Investors and addressing such matters as the Rating Agency or
such Investors may require; provided, however, that the Grantor shall not be
required to modify any documents evidencing or securing the Loan which would
modify (i) the interest rate payable under the Note, (ii) the stated maturity of
the Note, (iii) the amortization of principal of the Note, or (iv) any other
material terms or covenants of the Loan.

                  (c)      If Securities are issued in connection with the Loan
or a Secondary Market Transaction occurs with respect to the Loan, all Funds
held by Lender in escrow or pursuant to reserves in accordance with the Loan
Documents shall be deposited in "eligible accounts" at "eligible institutions"
and invested in "permitted investments" as then defined and required by any
Rating Agency.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                                              Columbia, Maryland

                                       48



         IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be
executed as of the day and year first above written.

                                   GRANTOR:

                                   AGREE - COLUMBIA
                                   CROSSING PROJECT, L.L.C.,
                                   a Delaware limited liability company

                                   By: AGREE LIMITED PARTNERSHIP,
                                       a Delaware limited partnership
                                       Its Member

                                       By: AGREE REALTY CORPORATION,
                                           a Maryland corporation
                                           Its General Partner

                                           By: /s/ Richard Agree
                                              _____________________
                                              Richard Agree
                                              President

STATE OF                     )
                             )
COUNTY OF                    )

         The foregoing instrument was acknowledged before me this _____ day of
October, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a
Maryland corporation, on behalf of the corporation as general partner of Agree
Limited Partnership, a Delaware partnership, as member of Agree - Columbia
Crossing Project, L.L.C., a Delaware limited liability company.

                                   ____________________________________________
                                   Name: ______________________________________
                                   Notary Public
                                   My Commission Expires: _____________________
                                   (SEAL)

                                                              Columbia, Maryland

                                      S-1



The undersigned, an attorney admitted to practice before the Court of Appeals of
Maryland, hereby certifies that the within instrument was prepared by me or
under my supervision.

___________________________

Attorney's Name:__________________

                                                              Columbia, Maryland
                                      S-2



                                    EXHIBIT A
                               (Legal Description)

SITUATED IN THE CITY OF COLUMBIA, COUNTY OF HOWARD, STATE OF MARYLAND:

         BEING KNOWN AND DESIGNATED as Parcel No. CC as shown on plat entitled
"Columbia, Route 175 Commercial, Section 1 Area 1, Parcels 'AA' thru 'CC' & Lot
2, A Resubdivision of Parcels V, Y, Z and Lot 1, Route 175 Commercial as shown
on Plat Nos. 12065, 12865 & 13104", which plat is recorded among the Land
Records of Howard County in Plat Book M.D.R. No. 13550.

         BEING the same lot of ground which by Deed dated April 30, 1999 and
recorded among the Land Records of Howard County in Liber No. 4721, folio 444
was granted and conveyed by The Howard Research and Development Corporation,
(formerly known as HRD Holdings, Inc.) to Agree-Columbia Crossing Project,
L.L.C., a Delaware limited liability corporation.

         BEING ALSO the same lot of ground described in an unrecorded Lease
between Agree-Columbia Crossing Project, L.L.C. and Borders, Inc. dated April
30, 1999.

         TOGETHER WITH the non-exclusive easements contained in Construction,
Operation and Reciprocal Easement Agreement dated March 8, 1996 and recorded
among the Land Records of Howard County in Liber 3678 folio 376, as amended by
Restated Construction Operation and Reciprocal Easement Agreement dated July 31,
1996 and recorded in Liber 3782 folio 147, amended by First Amendment to Amended
and Restated Construction, Operation and Reciprocal Easement Agreement dated
July 7, 1997 and recorded in Liber 4013 folio 362.

Tax Account No. 16-213896

                                                              Columbia, Maryland

                                      A - 1

EX-10.34

Recorded at the Request of and                                     EXHIBIT 10.34
When Recorded Return to:

Pepe & Hazard LLP                                                 NOT SUBJECT TO
225 Asylum Street - 22nd Floor                                   RECORDATION TAX
Hartford, CT  06103-4302
Attention:  Adam F. Zweifler, Esq.

                MAXIMUM PRINCIPAL AMOUNT SECURED IS $3,310,000.00
                  GRANTOR NOT PRIMARILY LIABLE FOR DEBT SECURED

                 INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT

         This INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT (the "DEED OF
TRUST") is dated as of the 31st day of October, 2003, by AGREE-MILESTONE CENTER
PROJECT, LLC, a Delaware limited liability company ("GRANTOR"), having its
principal office at 31850 Northwestern Highway, Farmington Hills, Michigan 48334
to and in favor of JON M LARIA AND ANNE HEESTERS SCHROTH, having an address c/o
Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, 18th Floor,
Baltimore, Maryland 21202 (the "TRUSTEE"), as trustee for NATIONWIDE LIFE
INSURANCE COMPANY, an Ohio corporation, its successors and assigns ("LENDER"),
having its principal office at One Nationwide Plaza, Columbus, Ohio 43215-2220,
Attention: Real Estate Investment Department, 34T, or at such other place as
Lender may from time to time designate.

                              W I T N E S S E T H:

         WHEREAS, Lender has made four loans of even date herewith in the
aggregate total original principal amount of Fifteen Million Dollars
($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the
following loans of even date herewith: a loan from Lender to AMCP Germantown
LLC, a Delaware limited liability company (the "BORROWER"), in the original
principal amount of $3,310,000.00 (this "LOAN"); a loan to ACCP Maryland LLC, a
Delaware limited liability company ("AGREE-COLUMBIA"), in the original principal
amount of $3,520,000.00 (the "AGREE-COLUMBIA LOAN"); a loan to Omaha Store No.
166 L.L.C., a Delaware limited liability company ("OMAHA") in the original
principal amount of $3,910,000.00 (the "OMAHA LOAN"); and a loan to Oklahoma
City Store No. 151 L.L.C., a Delaware limited liability company ("OKLAHOMA
CITY"), in the original principal amount of $4,260,000.00 (the "OKLAHOMA CITY
LOAN"). Agree-Columbia, Omaha and Oklahoma City are hereinafter referred to
collectively as the "AFFILIATED BORROWERS". The Agree-Columbia Loan, the Omaha
Loan and the Oklahoma City Loan are hereinafter referred to generically as an
"AFFILIATE LOAN" and collectively as the "AFFILIATE LOANS";

                                                            Germantown, Maryland



         WHEREAS, the Borrower is justly indebted to Lender under the Loan in
the original principal sum of Three Million Three Hundred Ten Thousand and
00/100 Dollars ($3,310,000.00), with interest thereon, which Loan is evidenced
and represented by that certain Note of even date herewith (which Note, as the
same may be extended, renewed, replaced, amended, restated or otherwise
modified, are hereinafter referred to as the "NOTE"), both principal and
interest being payable as therein provided, with the first payment on the Note
becoming due and payable on the date of disbursement; and

         WHEREAS, Grantor has guaranteed to Lender the payment and performance
of Borrower's obligations under the Note pursuant to a Guaranty Agreement of
even date herewith by Grantor (which Guaranty Agreement, as the same may be
extended, renewed, replaced, amended, restated or otherwise modified, is
hereinafter referred to as the "GRANTOR'S GUARANTY"). The terms, covenants and
conditions of the Grantor's Guaranty are hereby specifically incorporated in
this Deed of Trust by reference; and

         WHEREAS, Lender, as a condition precedent to the extension of credit
and the making of the Loan, evidenced by the Note and guaranteed by the
Grantor's Guaranty, has required that Grantor provide Lender with security for
the repayment of the Loan as well as for the performance, observance and
discharge by Grantor of various terms, covenants, conditions and agreements made
by Grantor to, with, in favor of and for the benefit of Lender with respect to
the Loan and such security;

         WHEREAS, (i) the Grantor's obligations under the Grantor's Guaranty
represent a contingent liability that does not mature until there has been an
uncured default by Borrower under the Loan Documents, (ii) Grantor and Borrower
are separate and distinct entities, and (iii) Grantor is not primarily liable
for the obligations of Borrower under the Loan Documents.

         NOW THEREFORE, in consideration of and in order to secure the Grantor's
Guaranty, together with interest thereon, as well as the payment of all other
sums of money secured hereby, as hereinafter provided; to secure the observance,
performance and discharge by Grantor of all terms, covenants, conditions and
agreements set forth in the Grantor's Guaranty, this Deed of Trust, and in all
other documents and instruments executed and delivered by Grantor to and in
favor of Lender for the purpose of further securing the repayment of the
Grantor's Guaranty; in order to charge the properties, interests and rights
hereinafter described with such payment, observance, performance and discharge;
and in consideration of the sum of one dollar paid by Lender to Grantor, and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged by Grantor, Grantor does hereby grant, bargain, sell,
convey, assign, transfer, pledge, deliver, hypothecate, warrant and confirm unto
Lender forever, all of Grantor's right, title and interest in and to the
following described properties, including all rights, interests, replacements,

                                                            Germantown, Maryland

                                       2


substitutions and additions thereto, therein or therefore (collectively, the
"DEED OF TRUST PROPERTY"):

         (i)      All that certain piece, parcel or tract of land or real
property of which Grantor is now seized and in actual or constructive
possession, situated in the City of Germantown, County of Montgomery, and State
of Maryland (the "STATE"), and being more particularly described on EXHIBIT A
attached hereto and by this reference made a part hereof (the "REAL PROPERTY");

         (ii)     All buildings, structures and other improvements of any kind,
nature or description now or hereafter erected, constructed, placed or located
upon the Real Property (the "IMPROVEMENTS"), including, without limitation, any
and all additions to, substitutions for or replacements of such Improvements;

         (iii)    All minerals, royalties, gas rights, water, water rights,
water stock, flowers, shrubs, lawn plants, crops, trees, timber and other
emblements now or hereafter located on, under or above all or any part of the
Real Property;

         (iv)     All and singular, the tenements, hereditaments, strips and
gores, rights-of-way, easements, privileges, profits and other appurtenances now
or hereafter belonging or in any way appertaining to the Real Property,
including, without limitation, all right, title and interest of the Grantor in
any after-acquired right, title, interest, remainder or reversion in and to the
beds of any ways, streets, avenues, roads, alleys, passages and public places,
open or proposed, in front of, running through, adjoining or adjacent to the
Real Property (the "APPURTENANCES");

         (v)      Any and all leases, licenses, contracts, rents, license fees,
royalties, issues, revenues, profits, proceeds, deposits, income and other
benefits, including accounts receivable, termination fees, of, accruing to or
derived from the Real Property, Improvements and Appurtenances, and any business
or enterprise presently situated or hereafter operated thereon and therewith and
all of Grantor's right, title and interest under any and all lease guaranties,
letters of credit, and any other credit support furnished to Grantor in
connection with any of the foregoing (the "RENTS");

         (vi)     Any and all awards, payments or settlements, including
interest thereon, and the right to receive the same, as a result of: (a) the
exercise of the right of eminent domain; (b) the alteration of the grade of any
way, street, avenue, road, alley, passage or public place; (c) any other injury,
damage, casualty or claim relating to the taking of, or decrease in the value
of, the Real Property, Improvements or Appurtenances; or (d) proceeds of
insurance awards, to the extent of all amounts which may be secured by this Deed
of Trust at the date of any such award or payment including but not limited to
Reasonable Attorneys' Fees (as hereinafter

                                                            Germantown, Maryland

                                       3



defined), costs and disbursements incurred by Lender in connection with the
collection of such award or payment;

         (vii)    All fixtures, materials, equipment, machinery, apparatus,
appliances, and other property whatsoever now or hereafter attached to,
installed in, or used in connection with the buildings and other improvements
now erected or hereafter to be erected on said land, including, but not limited
to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators,
air-conditioning and sprinkler systems, gas and electric fixtures, carpets,
rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all
other furnishings, tools, equipment and machinery, appliances, building
supplies, materials, and all fixtures, accessions and appurtenances thereto, and
all renewals or replacements of or substitutions for any of the foregoing, all
of which property and things are hereby declared to be permanent fixtures and
accessions to the freehold and part of the realty conveyed herein as security
for the indebtedness herein mentioned; and

         (viii)   All agreements or contracts relating to any interest rate cap
agreements, swaps or other interest hedging agreements;

         TO HAVE AND TO HOLD the foregoing Deed of Trust Property and the rights
hereby granted for its use and benefit unto Lender, Trustees and its successors
and assigns in fee simple forever, successors in interest of Trustees, in trust,
in fee simple forever;

         FIRST: Until any default in payment of any matter of indebtedness
hereby secured as herein provided for, or until breach of any of the covenants,
agreements, terms or conditions herein contained, to permit Grantor, its
successors and assigns, to possess and enjoy said Property and to receive the
rents, issues and profits thereof; and on full payment of the Note, the
Grantor's Guaranty, and of any extensions or renewals thereof, and interest
thereon, and all sums advanced or expended as herein provided, and all other
proper costs, charges, expenses, commissions, at any time before the sale
hereinafter provided for, to release and reconvey unto and at the cost of
Grantor, or the party or parties then claiming under Grantor, the aforesaid
Property.

         SECOND: Upon any default being made in payment under the Grantor's
Guaranty or any installment of principal, interest or either, due thereunder, or
any renewal or extension thereof, or this Deed of Trust; or upon any default in
the performance of any of the covenants, conditions or agreements herein or in
the Grantor's Guaranty contained; then upon any such default so made as
aforesaid:

         The Grantor, in accordance with the Maryland Rules of Procedure or any
Public General Law or Public Local Law of the State of Maryland relating to
deeds of trust or mortgages, including any supplements, amendments or additions
thereto, does hereby assent to

                                                            Germantown, Maryland

                                       4



the passage of a decree by the Circuit Court for Montgomery County, as may be
required by applicable law; or

         The Trustees or substitute Trustees shall have the power and, upon the
direction of the Lender, the duty to sell and in the event of default by any
purchaser, to re-sell the herein described Property.

         Upon any such sale, whether made under the assent to the passing of a
decree or under the power of sale, the party selling may sell the Property as a
whole or in such parcel or parcels, manner or order, as such party selling may,
in its sole discretion, elect; such sale may also be at the sole discretion of
the party selling subject to any one or more existing tenancies. Such sale shall
be at public auction at such time and place, upon such terms and conditions, and
after such previous public notice (in compliance with the Maryland Rules of
Procedure and any other applicable law) as Trustees, or substitute Trustees,
shall deem best for the interest of all parties concerned, and (the terms of the
sale being complied with), Trustees shall convey to the purchaser or purchasers
at the cost of such purchaser or purchasers, the Property so sold, such
purchaser or purchasers being hereby discharged from all liability for the
application of the purchase money; and shall apply the proceeds of sale (after
paying from the proceeds all expenses of sale of every kind and nature
whatsoever, including, without limitation, reasonable attorneys' fees, all taxes
and assessments thereon due, all insurance premiums and fees for guard or
watchmen services, all utility charges of whatsoever nature whether or not
listed on the real property tax bill, all sums advanced as herein provided, and
a trustees' commission equal to the commission allowed trustees for making sales
of property under decrees of the equity courts having jurisdiction), to the
payment of the indebtedness due and outstanding under the Grantor's Guaranty
whether matured or not, and the interest thereon, to date of payment from
purchaser, paying over the surplus, if any, to Grantor, its successors or
assigns, upon the surrender and delivery to the purchaser or to the heirs,
personal representatives, successors or assigns of purchaser, of the possession
of the Property so sold and conveyed, less the expense, if any, of obtaining
possession thereof. Half of such commissions and all such expenses and costs
shall be paid by Grantor, its heirs, successors or assigns in the event that the
debt evidenced by the Note shall be paid after any advertisement of the
Property, but before sale thereof. The Trustees may act hereunder and may sell
and convey said Property under power granted above although the Trustees have
been, may now be or may hereafter be attorneys or agents of the Lender. In the
event that the purchaser at such sale or resale shall be the then holder of the
Note, the Grantor's Guaranty which is entitled to receive the proceeds of such
sale, then the person responsible for conducting the sale shall accept on
account of the purchase price, without requiring the actual payment of money,
the written receipt of such purchaser for up to the amount of proceeds to which
such purchaser is entitled, except such sums as are necessary to pay the
above-mentioned expenses of sale. The holder of the Note, the Grantor's
Guaranty, as purchaser, need not tender cash or the equivalent thereof as a
required deposit in connection with any such sale.

                                                            Germantown, Maryland

                                       5



         Grantor, in addition, agrees that Lender, may in the event of default,
proceed under the Uniform Commercial Code as presently contained in the
Commercial Law Article of the Annotated Code of Maryland, and any and all
amendments, additions and supplements thereto as to all or any part of the
chattels, personal property, equipment and fixtures included in the Property
described aforesaid and Grantor agrees that the Trustees shall have and may
exercise with respect to all such chattels, personal property, equipment and
fixtures aforesaid, all the rights, remedies and powers of a secured party under
the Uniform Commercial Code including, without limitation, the right and power
to replevy, sell or otherwise dispose of, foreclose upon, lease or utilize all
or any part of such chattels, personal property, equipment and fixtures
aforesaid in any manner authorized or permitted under said Uniform Commercial
Code.

         In order to secure the repayment of the Loan guaranteed by the
Grantor's Guaranty, together with interest on the Loan, as well as the payment
of all other sums of money secured hereby, as hereinafter provided; and to
secure the observance, performance and discharge by Grantor of all covenants,
conditions and agreements set forth in the Grantor's Guaranty, this Deed of
Trust and in the other documents and instruments executed and delivered by
Grantor to and in favor of Lender for the purpose of further securing the
repayment of the Loan guaranteed by the Grantor's Guaranty; and in order to
charge the properties, interests and rights hereinafter described with such
payment, observance, performance and discharge; and in consideration of the sum
of Ten Dollars ($10.00) paid by Lender and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
Grantor hereby grants Trustees, their successors and assigns, a security
interest in all Fixtures, Goods (including, without limitation, Consumer Goods,
Inventory, Equipment and Farm Products), Accounts, Chattel Paper (including,
without limitation, Electronic Chattel Paper and Tangible Chattel Paper),
Instruments, General Intangibles (including, without limitation, Payment
Intangibles and Software), Letters of Credit, Letter-of-Credit Rights,
Documents, As-Extracted Collateral, Money and Deposit Accounts of every kind,
and all proceeds thereof, including, without limitation, any and all licenses,
permits, franchises, trademarks, trade names, service marks or logos, plans,
specifications, maps, construction contracts, instruments, insurance policies,
fittings and fixtures of every kind, which is, are or shall hereafter be located
upon, attached, affixed to or used or useful, either directly or indirectly, in
connection with the complete and comfortable use, occupancy and operation of the
Real Property, Improvements or Appurtenances as a retail project (the "EXISTING
USE"), or any other business, enterprise or operation as may hereafter be
conducted upon or with said Real Property, Improvements or Appurtenances,
including, without limitation, any and all licenses, permits or franchises, used
or required in connection with such use, occupancy or operation as well as the
proceeds thereof or therefrom regardless of form, all security deposits and
advance rentals under lease agreements now or at any time hereafter covering or
affecting any of the Property and held by or for the benefit of Grantor, all
monetary deposits which Grantor has been required to give to any public or
private utility with respect to utility services furnished to the Real Property

                                                            Germantown, Maryland

                                       6



or Improvements, all rents, issues and profits from leases of all or any part of
the Real Property or Improvements, all proceeds (including premium refunds) of
each policy of insurance relating to the Real Property or Improvements, all
proceeds from the taking of the Real Property or Improvements or any part
thereof or any interest therein or right or estate appurtenant thereto by
eminent domain or by purchase in lieu thereof, all amounts deposited in escrow
for the payment of ad valorem taxes, assessments, charges, ground rentals and/or
premiums for policies of insurance with respect to the Real Property or
Improvements, all proceeds and other amounts paid or owing to Grantor under or
pursuant to any and all contracts and bonds relating to the construction,
erection or renovation of the Real Property or Improvements, all oil, gas and
other hydrocarbons and other minerals produced from or allocated to the Real
Property and all products processed or obtained therefrom, the proceeds thereof,
and all accounts and general intangibles under which such proceeds may arise,
together with any sums of money that may now or at any time hereafter become due
and payable to Grantor by virtue of any and all royalties, overriding royalties,
bonuses, delay rentals and any other amount of any kind or character arising
under any and all present and future oil, gas and mining leases covering the
Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL
PROPERTY," which term expressly excludes any toxic waste or substance deemed
hazardous under federal, regional, state or local laws, codes, ordinances,
statutes, rules, regulations, decisions or orders). The Deed of Trust Property
and the Fixtures and Personal Property are herein together referred to as the
"PROPERTY".

         Except as otherwise expressly provided in this Deed of Trust, all terms
in this Deed of Trust relating to the Property and the grant of the foregoing
security interest which are defined in the Uniform Commercial Code of the State
(the "UCC") shall have the meanings assigned to them in Article 9 (or, absent
definition in Article 9, in any other Article) of the UCC, as those meanings may
be amended, revised or replaced from time to time. Notwithstanding the
foregoing, the parties intend that the terms used herein which are defined in
the UCC have, at all times, the broadest and most inclusive meanings possible.
Accordingly, if the UCC shall in the future be amended or held by a court to
define any term used herein more broadly or inclusively than the UCC in effect
on the date of this Deed of Trust, then such term, as used herein, shall be
given such broadened meaning. If the UCC shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the UCC in effect on the date of this Deed of Trust, such amendment or
holding shall be disregarded in defining terms used in this Deed of Trust.

         Grantor hereby covenants and warrants with and to Lender that Grantor
is indefeasibly seized of the Property and has good right, full power, and
lawful authority to convey and encumber all of the same as aforesaid; that
Grantor hereby fully warrants the title to the Property and will defend the same
and the validity and priority of the lien and encumbrance of this Deed of Trust
against the lawful claims of all persons whomsoever; and Grantor further
warrants that the Property is free and clear of all liens and encumbrances of
any kind, nature or description, save and except only (with respect to said Real
Property, Improvements and Appurtenances) for real property taxes for years
subsequent to 2004 (which are not yet due and

                                                            Germantown, Maryland

                                       7



payable) and those exceptions accepted by Lender as set forth in the title
insurance commitment or proforma policy issued to Lender precedent to the
issuance of a Lender's Policy of Title Insurance insuring the second lien
priority of this Deed of Trust (the "PERMITTED EXCEPTIONS").

         If Grantor shall pay to Lender the Loan guaranteed by the Grantor's
Guaranty and if Grantor shall duly, promptly and fully perform, discharge,
execute, effect, complete and comply with and abide by each and every one of the
terms, covenants, conditions and agreements of the Grantor's Guaranty, this Deed
of Trust, and all other Loan Documents, then this Deed of Trust and the estates
and interests hereby granted and created shall cease, terminate and be null and
void, and shall be discharged of record at the expense of Grantor.

         Grantor, for the benefit of Lender and its successors and assigns, does
hereby expressly covenant and agree as follows:

         1.       PERFORMANCE OF GUARANTY. Grantor shall fulfill all of its
obligations under the Grantor's Guaranty, together with all interest thereon, in
accordance with the terms, covenants and conditions of the Grantor's Guaranty
promptly at the times, at the place and in the manner that said principal and
interest shall become due under the Grantor's Guaranty, and shall promptly and
punctually pay all other sums required to be paid by Grantor pursuant to the
terms, covenants and conditions of the Grantor's Guaranty, this Deed of Trust,
the Indemnity Assignment of Leases, Rents and Profits of even date herewith
(which Indemnity Assignment of Leases, Rents and Profits, as the same may be
extended, renewed, replaced, amended, restated or otherwise modified, is
hereinafter referred to as the "ASSIGNMENT"), and all other documents and
instruments executed as further evidence of, as additional security for or
executed in connection with the Loan evidenced by the Note, guaranteed by the
Grantor's Guaranty and secured by this Deed of Trust (collectively, the "LOAN
DOCUMENTS").

         2.       PERFORMANCE OF OTHER OBLIGATIONS. Grantor shall perform,
comply with and abide by, and cause Borrower to perform, comply with and abide
by, each and every one of the terms, covenants, conditions and agreements
contained and set forth in the Note, the Grantor's Guaranty, this Deed of Trust,
and the other Loan Documents, shall comply with all Laws (hereafter defined) and
shall perform all of its obligations under any term, covenant, condition,
restriction or agreement of record affecting the Property, and to insure that at
all times the Property constitutes one or more legal lots capable of being
conveyed without violation of any subdivision or platting laws, codes,
ordinances, statutes, rules, regulations, or other laws relating to the
division, separation or subdivision of real property.

                                                            Germantown, Maryland

                                       8



         3.       PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY;
HAZARDOUS WASTE.

                  (a)      Grantor shall keep all Improvements now existing or
hereafter erected on the Real Property in good order and repair, only to be used
for the Existing Use, and not to do or permit any waste, impairment or
deterioration thereof or thereon, nor to alter, remove or demolish any of the
Improvements or any Fixtures and Personal Property attached or appertaining
thereto, without the prior written consent of Lender, nor to initiate, join in
or consent to any change in any private restrictive covenant, zoning ordinance
or other public or private restrictions limiting or defining the uses which may
be made of the Property or any part thereof, nor to do or permit any other act
whereby the Property shall become less valuable, be used for purposes contrary
to applicable Law or be used in any manner which will increase the premium for
or result in a termination or cancellation of the insurance policies hereinafter
required to be kept and maintained on the Property. In furtherance of, and not
by way of limitation upon, the foregoing covenant, Grantor shall effect such
repairs as Lender may reasonably require, and from time to time make all needful
and proper replacements so that the Improvements, Appurtenances, Fixtures and
Personal Property will, at all times, be in good condition, fit and proper for
the respective purposes for which they were originally erected or installed. In
connection with the making of such repairs, Grantor shall use contractors who
are properly licensed, who carry workers' compensation insurance and appropriate
liability insurance, who generally have a good reputation for completing their
work in a neat, prompt and workmanlike manner, and use only new or
re-manufactured goods of a quality as good or better than that originally used
on the Property. As provided herein, Grantor shall insure that no liens are
filed against the Property that relate in any way to the repair work provided
for herein. For so long as that certain Lease of the Property (the "BORDERS
LEASE") dated November 14, 2002, between Grantor, as landlord, and Border's,
Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with
Borders as the tenant thereunder and Grantor is diligently enforcing the
obligations of Borders thereunder, Grantor shall be deemed to be in compliance
with the requirements of this subparagraph.

         Grantor at all times shall keep the Property and ground water of the
Property free of Hazardous Materials (as hereinafter defined) to the extent
required by applicable governmental agencies and free of any liens arising in
connection therewith. Grantor shall not and shall not knowingly permit its
tenants or any third party requiring the consent of Grantor to enter the
Property, to use, generate, manufacture, treat, store, release, threaten
release, transport on or over, emit or dispose of Hazardous Materials in, on,
over, under or about the Property including the ground water of the Property in
violation of any federal, regional, state or local law, code, ordinance,
statute, rule, regulation, decision or order currently in existence or hereafter
enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Grantor shall give
Lender prompt Written Notice (as hereinafter defined) of any claim by any
person, entity, or governmental agency that a significant release or disposal of
Hazardous Materials has occurred in, on, over, under or about the Property,
including the ground water of the Property, in

                                                            Germantown, Maryland

                                       9



excess of those permitted by the Hazardous Waste Laws, whether caused by the
Grantor, any tenant or any third party. Grantor, through its professional
engineers and at Grantor's sole cost, shall promptly and thoroughly investigate
any suspected release of Hazardous Materials in, on, over, under or about the
Property, including the ground water of the Property. Grantor shall forthwith
remove, repair, remediate, clean up, and/or detoxify any Hazardous Materials
found in, on, over, under or about the Property or in the ground water of the
Property to the extent such actions are required by any applicable Hazardous
Waste Laws, and whether or not Grantor was responsible for the existence of the
Hazardous Materials in, on, over, under or about the Property or the ground
water of the Property. "HAZARDOUS MATERIALS" shall include, but not be limited
to, substances defined as "hazardous substances," "hazardous materials," or
"toxic substances" under any Hazardous Waste Laws.

                  (b)      In addition, Grantor shall not incorporate any
underground storage tanks into the Real Property without the prior written
consent of Lender, and shall insure that all tanks currently on the Real
Property comply with current Hazardous Waste Laws and underground storage tank
regulations and are properly registered.

         Grantor hereby agrees to indemnify and defend Lender and Trustees and
hold Lender and Trustees harmless from and against any and all losses,
liabilities, damages, injuries, costs, expenses, fines, fees, suits, actions,
debts, obligations, and claims of any and every kind whatsoever, including
Reasonable Attorneys' Fees (collectively, "LOSSES") paid, incurred or suffered
by, or asserted against, Lender or Trustees for, with respect to, or as a direct
or indirect result of, the presence in, on, over, under or about, or the escape,
seepage, leakage, spillage, discharge, emission or release from, the Property of
any Hazardous Materials (including, without limitation, any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under any
Hazardous Waste Laws), regardless of the source of origination and whether or
not caused by, or within the control of, Grantor and including any claims of
lender's negligence or strict liability, but excluding Lender's willful
misconduct or gross negligence.

         Liability under this Section 3(b) and similar provisions in this Deed
of Trust and the other Loan Documents concerning Hazardous Materials shall
survive repayment of the Note, the Grantor's Guaranty, and satisfaction of this
Deed of Trust; provided, however, Grantor shall have no liability under this
Section 3(b) regarding Hazardous Materials if either (i) the Property becomes
contaminated subsequent to Lender's acquisition of the Property by foreclosure,
acceptance by Lender of a deed in lieu thereof, or subsequent to any transfer of
ownership of the Property which was approved or authorized by Lender in writing,
pursuant to this Deed of Trust, provided that such transferee assumes in writing
all of the obligations of Grantor with respect to Hazardous Materials pursuant
to the Loan Documents, or (ii) at such time Grantor provides Lender with an
environmental assessment report acceptable to Lender, in Lender's sole
discretion, showing the Property to be free of Hazardous Materials and not in
violation of any Hazardous Waste Laws. The burden of proof under this Section
3(b) with

                                                            Germantown, Maryland

                                       10



regard to establishing the date upon which any Hazardous Materials was released
in, on, over, under or about the Property shall be upon Grantor.

                  (c)      Grantor at all times shall maintain the Property in
full compliance with all federal, state, county, regional or local laws, codes,
ordinances, rules, regulations, decisions and orders currently in existence or
hereafter enacted or rendered, governing accessibility for the disabled,
including but not limited to: The Architectural Barriers Act of 1968; The
Rehabilitation Act of 1973; The Fair Housing Act of 1988; The Americans with
Disabilities Act; and The Maryland Elimination of Architectural Barriers Act
(collectively, the "ACCESSIBILITY LAWS").

         Grantor hereby agrees to indemnify and defend Lender and hold Lender
harmless from and against any and all Losses paid, incurred or suffered by, or
asserted against Lender for, with respect to, or as a direct or indirect result
of, the non-compliance of the Property with the Accessibility Laws whether or
not caused by, or within the control of, Grantor, and including any claims of
lender's negligence or strict liability, but excluding Lender's willful
misconduct or gross negligence.

         Liability under this Section 3(c) and similar provisions in this Deed
of Trust and the other Loan Documents concerning Accessibility Laws shall
survive repayment of the Note and satisfaction of this Deed of Trust; provided,
however, Grantor shall not be liable under this Section 3(c) for compliance with
any Accessibility Laws if such Accessibility Laws first become effective, or
such violations result from alterations or improvements to the Property that are
performed subsequent to Lender's acquisition of the Property by foreclosure or
acceptance of a deed in lieu thereof or subsequent to any transfer which was
approved or authorized by Lender pursuant to this Deed of Trust, provided that
such transferee assumes in writing all obligations pertaining to the
Accessibility Laws pursuant to this Deed of Trust and the other Loan Documents.
The burden of proof under this Section 3(c) with regard to establishing the date
upon which such non-compliance with any Accessibility Laws occurred at the
Property shall be upon Grantor.

                  (d)      Lender, and/or its agents, shall have the right and
shall be permitted, subject to the rights of Borders under the Borders Lease,
but shall not be required, at all reasonable times, to enter upon and inspect
the Property to insure compliance with the foregoing covenants, and any and all
other terms, covenants, conditions and agreements set forth in this Deed of
Trust.

                  4.       PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES.
Grantor shall pay, or cause to be paid, all taxes, assessments and other charges
as already levied or assessed, or that may be hereafter levied or assessed, upon
or against the Property, when the same shall become due and payable according to
Law, before delinquency, and before any interest or penalty shall attach
thereto, and to deliver official receipts evidencing the

                                                            Germantown, Maryland

                                       11


payment of the same to Lender not later than thirty (30) days following the
payment of the same. Grantor shall have the right to contest, in good faith and
in accordance with applicable Laws and procedures, the proposed assessment of ad
valorem taxes or special assessments by governmental authorities having
jurisdiction over the Property; provided, however, Grantor shall give Written
Notice of its intent to bring such an action to Lender, and Lender may, in its
sole discretion, require Grantor to post a bond or other collateral satisfactory
to Lender (and acceptable to the title company insuring this Deed of Trust) as a
result of Grantor's act.

         5.       PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Grantor shall
immediately pay and discharge from time to time when the same shall become due,
all lawful claims and demands of mechanics, materialmen, laborers, realtors,
brokers and others which, if unpaid, might result in, or permit the creation of,
a lien, charge or encumbrance upon the Property or any part thereof, or on the
Rents, arising therefrom and, in general, to do or cause to be done everything
necessary so that the lien of this Deed of Trust shall be fully preserved, at
the sole cost of Grantor, without expense to Lender. Grantor shall have the
right to contest, in good faith and in accordance with applicable Laws and
procedures, mechanics', materialmens' and other such liens filed against the
Property; provided however, that Grantor shall give Written Notice to Lender of
its intent to bring such action, and Lender may, in Lender's sole discretion,
require Grantor to post a bond or other collateral satisfactory to Lender (and
acceptable to the title company insuring this Deed of Trust) as a result of
Grantor's act.

         6.       PAYMENT OF JUNIOR ENCUMBRANCES. Grantor shall permit no
default or delinquency under any other lien, imposition, charge or encumbrance
against the Property, even though junior and inferior to the lien of this Deed
of Trust; provided however, the foregoing shall not be construed to permit any
such additional lien or encumbrance against the Property, other than the
Permitted Exceptions.

         7.       PAYMENT OF MORTGAGE TAXES. Grantor shall pay any and all taxes
which may be levied or assessed directly or indirectly upon the Note and/or this
Deed of Trust (except for income taxes payable by Lender) or the Loan, without
regard to any Law which may be hereafter enacted imposing payment of the whole
or any part thereof upon Lender, its successors or assigns. Upon violation of
this covenant, or upon the rendering by any court of competent jurisdiction of a
decision that such a covenant by Grantor is legally inoperative, or if any court
of competent jurisdiction shall render a decision that the rate of said tax when
added to the rate of interest provided for in the Note exceeds the then maximum
rate of interest allowed by Law, then, and in any such event, the debt hereby
secured shall, at the option of Lender, its successors or assigns, become
immediately due and payable, anything contained in this Deed of Trust or in the
Grantor's Guaranty notwithstanding, without the imposition of a Prepayment
Premium (as defined in the Note). The additional amounts which may become due
and payable hereunder shall become a part of the Loan secured by this Deed of
Trust.

                                                            Germantown, Maryland

                                       12



         8.       HAZARD INSURANCE. Grantor shall continuously, during the term
of this Deed of Trust, keep the Improvements, Appurtenances, and Fixtures and
Personal Property, now or hereafter existing, erected, installed and located in
or upon the Real Property, insured with extended coverage insurance against loss
or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine
subsidence, acts of terrorism, and such other hazards, casualties, contingencies
and perils including, without limitation, other risks insured against by persons
operating like properties in the locality of the Property, or otherwise deemed
necessary or advisable by Lender or any Rating Agency (as hereinafter defined),
on such forms and with such deductibles as may be required by Lender or any
Rating Agency, covering the Property in the amount of the full replacement cost
thereof, (without taking into account any depreciation) less excavating and
foundation costs, and covering all loss or abatement of rental or other income,
without a provision for co-insurance, in an amount equal to the scheduled rental
income of the Property for at least twelve (12) months, or if applicable,
business interruption insurance in an amount sufficient to pay debt service on
the Note, operating expenses, taxes and insurance on the Property for a period
of twelve (12) months, and covering loss by flood (if the Property lies in a
Special Flood Hazard Area as designated on the Department of Housing and Urban
Development's Maps, or other flood prone designation) in an amount equal to the
outstanding principal balance of the Loan or such other amount as approved by
Lender, and earthquake insurance with a deductible amount of no more than ten
percent (10%) of the policy amount if, in the judgment of Lender's inspecting
architect, the Property lies in an area of anticipated significant seismic
activity, and "Ordinance or Law Coverage" or "Enforcement" endorsements in
amounts satisfactory to Lender if any of the Improvements or the use of the
Property shall at any time constitute legal non-conforming structures or uses or
the ability to rebuild the Improvements is restricted or prohibited, and
comprehensive boiler and machinery insurance (without exclusion for explosion),
if applicable, in amounts as shall be reasonably required by Lender or any
Rating Agency and covering all boilers or other pressure vessels, machinery and
equipment located at or about the Property (including, without limitation,
electrical equipment, sprinkler systems, heating and air conditioning equipment,
refrigeration equipment and piping). All such insurance shall be carried with a
company or companies licensed to do business in the State, which is acceptable
to Lender, which company or companies shall have a rating at the time this Deed
of Trust is executed equivalent to at least A:X as shown in the most recent
Best's Key Rating Guide. The original policy or policies and renewals thereof
(or, at the sole option of Lender, duplicate originals or certified copies
thereof), together with receipts evidencing payment of the premium therefor,
shall be deposited with, held by and are hereby assigned to, Lender as
additional security for the Loan. Each such policy of insurance shall contain a
noncontributing loss payable clause in favor of and in a form acceptable to
Lender, and shall provide for not less than thirty (30) days prior Written
Notice to Lender of any intent to modify, non-renew, cancel or terminate the
policy or policies, or the expiration of such policies of insurance, or the
exclusion of any individual risk such as acts of terrorism. If the insurance
required under this Section 8 or any portion thereof is maintained pursuant to a
blanket policy, Grantor shall furnish to Lender a certified copy of such policy,
together with an original Evidence of Insurance Certificate (Acord Form 27) for

                                                            Germantown, Maryland

                                       13



hazard insurance indicating that Lender is an additional insured under such
policy in regard to the Property and showing the amount of coverage apportioned
to the Property, which coverage shall be in an amount sufficient to satisfy the
requirements hereof. Not less than fifteen (15) days prior to the expiration
dates of each policy required of Grantor hereunder, Grantor will deliver to
Lender a renewal policy or policies marked "premium paid" or accompanied by
other evidence of payment and renewal satisfactory to Lender. In the event of
foreclosure of this Deed of Trust or other transfer of title to the Property in
extinguishment of the Loan, all right, title and interest of Grantor, in and to
any insurance policies then in force including any rights to unearned premiums,
and in and to insurance proceeds then payable, shall pass to the purchaser or
grantee.

         For so long as the Borders Lease remains in effect with Borders as the
tenant thereunder, then to the extent that Borders self-insures to satisfy its
insurance obligations under the Borders Lease, Lender shall accept such
self-insurance as satisfying the obligation of Grantor to provide insurance
under this Section 8, provided that (i) Borders, or the guarantor of the Borders
Lease, Boarders Group, Inc., maintains a minimum net worth of not less than Two
Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance
otherwise satisfies the requirements of this Section 8 as to the amount required
to be maintained by Borders, and (iii) Grantor provides to Lender written
verification of such coverage in form and substance reasonably acceptable to
Lender. Notwithstanding the foregoing, Lender shall have the right require
Grantor to maintain in effect a separate policy of liability insurance with
respect to the Property meeting the requirements of Section 9 of this Deed of
Trust.

         In the event of loss covered by insurance maintained by Grantor with
respect to the Property, including, without limitation, insurance covering
hazards, casualties, contingencies and perils for which insurance has been
required by Lender hereunder, Grantor shall give immediate notice thereof to
Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an
interest for Lender to, at its option, make proof of loss and/or to file a claim
thereunder. Each insurance company concerned is hereby notified, authorized and
directed to make payment for such loss directly to Lender, instead of to Grantor
and Lender jointly, and Grantor hereby authorizes Lender to adjust and
compromise any losses for which insurance proceeds are payable under any of the
aforesaid insurance policies and, after deducting the costs of collection, to
apply the proceeds of such insurance, at its option either: (a) to the
restoration or repair of the insured Improvements, Appurtenances, and Fixtures
and Personal Property, provided that, in the opinion and sole discretion of
Lender, such restoration or repair is reasonably practical and, provided
further, that, in the opinion and sole discretion of Lender, either: (i) the
insurance proceeds so collected are sufficient to cover the cost of such
restoration or repair of the damage or destruction with respect to which such
proceeds were paid, or (ii) the insurance proceeds so collected are not
sufficient alone to cover the cost of such restoration or repair, but are
sufficient therefor when taken together with funds provided and made available
by Grantor from other sources; in which event Lender shall make such insurance
proceeds available to Grantor for the purpose of effecting such restoration or
repair;

                                                            Germantown, Maryland

                                       14



but Lender shall not be obligated to see to the proper application of such
insurance proceeds nor shall the amount of funds so released or used be deemed
to be payment of or on account of the Loan; or (b) to the reduction of the Loan,
notwithstanding the fact that the amount owing thereon may not then be due and
payable or that said Loan is otherwise adequately secured, in which event such
proceeds shall be applied at par against the Loan and the monthly payment due on
account of such Loan shall be reduced accordingly as calculated by Lender. None
of such actions taken by Lender shall be deemed to be or result in a waiver or
impairment of any equity, lien or right of Lender under and by virtue of this
Deed of Trust, nor will the application of such insurance proceeds to the
reduction of the Loan serve to cure any default in the payment thereof. In the
event of foreclosure of this Deed of Trust or other transfer of title to the
Property in extinguishment of the Loan, all right, title and interest of Grantor
in and to any insurance policies then in force including any rights to unearned
premiums and in and to insurance proceeds then payable, shall pass to the
purchaser or grantee.

         In case of Grantor's failure to keep the Property properly insured as
required herein, Lender, its successors or assigns, may, at its option (but
shall not be required to) acquire such insurance as required herein at Grantor's
sole expense.

         Notwithstanding anything set forth in this Section 8 to the contrary,
in the event of loss or damage to the Property by fire or other casualty covered
by insurance maintained by Grantor with respect to the Property, including,
without limitation, insurance which has been required by Lender hereunder and
provided by Grantor, and the amount of such loss or damage does not exceed
twenty-five percent (25%) of the unpaid principal balance of the Note, Lender
hereby agrees to allow the proceeds of insurance to be used for the restoration
of the Property and to release such insurance proceeds to Grantor as such
restoration progresses, provided:

                  (a)      Neither Grantor nor Borrower is in default under any
of the terms, covenants and conditions of this Deed of Trust, the Grantor's
Guaranty, the Note or any of the other Loan Documents;

                  (b)      The Improvements, after such restoration, shall be at
least eighty percent (80%) leased pursuant to leases approved in writing by
Lender;

                  (c)      The plans and specifications for the restoration of
the Property are approved in writing by Lender in advance;

                  (d)      At all times during such restoration, Grantor has
deposited with Lender funds which, when added to the insurance proceeds received
by Lender, are sufficient to complete the restoration of the Property in
accordance with the approved plans and specifications, and all applicable
building codes, zoning ordinances, regulations and

                                                            Germantown, Maryland

                                       15



Accessibility Laws, and further, that the funds retained by Lender are
sufficient to complete the restoration of the Property as certified to Lender by
Lender's inspecting architect/engineer;

                  (e)      Grantor provides suitable completion, payment and
performance bonds, builders' all risk insurance, and all necessary licenses and
permits for such restoration in form and amount acceptable to Lender;

                  (f)      The insurer under such policies of fire or other
casualty insurance does not assert any defense to payment under such policies
against Lender, Grantor, any tenant, or third party of Grantor with regard to
the Property;

                  (g)      Lender shall have the option, upon the completion of
such restoration of the Property, to apply any surplus insurance proceeds
remaining after the completion of such restoration, at par, to the reduction of
the outstanding principal balance of the Note; notwithstanding the fact that the
amount owing thereon may not then be due and payable or that said Loan is
otherwise adequately secured;

                  (h)      The funds held by Lender shall be disbursed no more
often than once per month and in not more than five (5) increments of not less
than Fifty Thousand Dollars ($50,000) each, except the final disbursement of
such funds which may be in an amount less than Fifty Thousand Dollars ($50,000);

                  (i)      Lender's obligation to make any such disbursement
shall be conditioned upon Lender's receipt of written certification from
Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender
by Grantor) that all construction and work for which such disbursement is
requested has been completed in accordance with the approved plans and
specifications and in accordance with all applicable building codes, zoning
ordinances and all other Laws and, further, that Grantor has deposited with
Lender sufficient funds to complete such restoration in accordance with Section
8(d);

                  (j)      In the reasonable judgment of the Lender, the
Property can be restored within six months after insurance proceeds are made
available and at least six months prior to the Maturity Date (as defined in the
Note) to an economic unit not less valuable (including an assessment by Lender
of the impact of the termination of any Occupancy Leases due to such casualty)
and not less useful than the same was prior to the casualty, and after such
restoration will adequately secure the outstanding balance of the Loan; and

                  (k)      Lender shall be entitled to require and to impose
such other conditions to the release of such funds as would be customarily or
reasonably be required and imposed by institutional mortgage lenders for a
project of similar nature and cost.

                                                            Germantown, Maryland

                                       16



         In the event of a casualty, provided that Grantor is not then in
default hereunder beyond the expiration of applicable notice and cure periods,
then notwithstanding any provision of this Section 8 to the contrary, Lender
shall make insurance proceeds available for restoration of the Property to the
extent required under the terms of the Borders Lease.

         9.       LIABILITY INSURANCE. Grantor shall carry and maintain such
commercial general liability insurance as may from time to time be required by
Lender or any Rating Agency, taking into consideration the type of property
being insured and the corresponding liability exposure, on forms, with
deductibles, in amounts and with such company or companies licensed to do
business in the State and as may be acceptable to Lender. All such commercial
general liability insurance shall be carried with a company or companies which
have and maintain a rating equivalent to at least A:X as shown in the most
recent Best's Key Rating Guide. The original policy or policies and all renewals
thereof (or, at the sole option of Lender, duplicate originals or certified
copies thereof), together with a Certificate of Insurance (Acord Form 25S) and
receipts evidencing payment of the premium therefor, shall be deposited with,
held by and are hereby assigned to, Lender as additional security for the Loan.
Such policy or policies of insurance shall name Lender as an additional insured
and shall provide for not less than thirty (30) days prior Written Notice to
Lender of any intent to modify, cancel, non-renew, or terminate the policy or
policies or the expiration of such policy or policies of insurance, or the
exclusion of any individual risk such as acts of terrorism. Not less than
fifteen (15) days prior to the expiration dates of each policy or policies
required of Grantor hereunder, Grantor will deliver to Lender a renewal policy
or policies marked "premium paid" or accompanied by other evidence of payment
and renewal satisfactory to Lender. In the event of foreclosure of this Deed of
Trust or other transfer of title to the Property in extinguishment of the Loan,
all right, title and interest of Grantor, in and to any insurance policies then
in force including any rights to unearned premiums, and in and to insurance
proceeds then payable, shall pass to the purchaser or grantee. In case of
Grantor's failure to keep the Property properly insured as required herein,
Lender, its successors or assigns, may, at its option (but shall not be required
to) acquire such insurance as required herein at Grantor's sole expense.

         10.      COMPLIANCE WITH LAWS.

                  (a)      Grantor shall observe, abide by and comply with all
federal, regional, state and local laws, codes, ordinances, statutes, rules,
regulations, decisions, orders, requirements or decrees relating to the Property
enacted, promulgated or issued by any federal, state, county or local
governmental or quasi-governmental authority or any agency or subdivision
thereof having jurisdiction over Grantor or the Property, which now or hereafter
affect Grantor or the Property, including Hazardous Waste Laws and Accessibility
Laws (collectively, the "LAWS"), and to observe and comply with all conditions
and requirements necessary to preserve and extend any and all rights, licenses,
permits (including, but not limited to, zoning, variances, special exceptions
and nonconforming uses), privileges,

                                                            Germantown, Maryland

                                       17



franchises and concessions which are applicable to the Property, or which have
been granted to or contracted for by Grantor in connection with any existing,
presently contemplated or future uses of the Property.

                  (b)      Grantor shall not engage in any transaction which
would cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Grantor's Guaranty, this Deed
of Trust and the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Grantor shall
deliver to Lender such certifications or other evidence from time to time
throughout the term of this Deed of Trust, as requested by Lender in its sole
discretion, that (i) Grantor is not an "employee benefit plan" as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Grantor is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; and (iii) one or more of the following circumstances is
true:

                           (1)      Equity interests in Grantor are publicly
         offered securities, within the meaning of 29 C.F.R. Section
         2510.3-101(b)(2);

                           (2)      Less than twenty-five percent (25%) of each
         outstanding class of equity interests in Grantor are held by "benefit
         plan investors" within the meaning of 29 C.F.R. Section
         2510.3-101(f)(2); or

                           (3)      Grantor qualifies as an "operating company"
         or a "real estate operating company" within the meaning of 29 C.F.R.
         Section  2510.3-101(c) or (e) or an investment company registered under
         The Investment Company Act of 1940.

         11.      MAINTENANCE OF PERMITS. Grantor shall obtain, keep and
constantly maintain in full force and effect during the entire term of this Deed
of Trust, all certificates, licenses and permits necessary to keep the Property
operating for the Existing Use and, except as specifically provided for in this
Deed of Trust, not to assign, transfer or in any manner change such
certificates, licenses or permits without first receiving the written consent of
Lender.

         12.      OBLIGATIONS OF GRANTOR AS LESSOR.

                  (a)      Grantor shall perform every obligation of Grantor (as
the landlord) and enforce every obligation of the tenant in any and every lease,
license or other occupancy agreement of or affecting the Property or any part
thereof (the "OCCUPANCY LEASES"), and not to modify, alter, waive or cancel any
such Occupancy Leases or any part thereof or rights thereunder, without the
prior written consent of Lender (but such consent shall not be required for such
action as to Occupancy Leases of three thousand (3,000) square feet or less if
such

                                                            Germantown, Maryland

                                       18



action is in the ordinary course of business of owning and operating the
Property in a prudent and business-like manner, on then current market terms),
nor collect for more than thirty (30) days in advance of the date due any Rents
that may be collectible under any such Occupancy Leases and, except as provided
for in this Deed of Trust, not to assign any such Occupancy Lease(s) or any such
Rents relating thereto, to any party other than Lender, without the prior
written consent of Lender. Grantor will notify Lender in writing of any default
under any Occupancy Lease. In the event of default under any such Occupancy
Lease by reason of failure of Grantor to keep or perform one or more of the
covenants, agreements or conditions thereof, Lender is hereby authorized and
empowered, and may, at its sole option, remedy, remove or cure any such default,
and further, Lender may, at its sole option and in its sole discretion but
without obligation to do so, pay any sum of money deemed necessary by Lender for
the performance of said covenants, agreements and conditions, or for the curing
or removal of any such default, and incur all expenses and obligations which
Lender may consider necessary or reasonable in connection therewith, and Grantor
shall repay on demand all such sums so paid or advanced by Lender together with
interest thereon until paid at the lesser of either: (i) the highest rate of
interest then allowed by the Laws of the State, or, if controlling, the Laws of
the United States, or (ii) the then applicable interest rate of the Note plus
five hundred (500) basis points per annum; all of such sums, if unpaid, shall be
added to and become part of the Loan.

                  (b)      All such Occupancy Leases hereafter made shall be
subject to the approval of Lender and: (i) shall be at competitive market rental
rates then prevailing in the geographic area for projects used for the Existing
Use comparable to the Property; (ii) shall have lease terms of not less than
three years; and (iii) at Lender's option, shall be superior or subordinate in
all respects to the lien of this Deed of Trust. Provided, however, that Lender
shall not require approval in advance of any Occupancy Leases which conform to
the Grantor's Form Lease (as hereinafter defined) as previously approved by
Lender, except as set forth below. Neither the right nor the exercise of the
right herein granted unto Lender to keep or perform any such covenants,
agreements or conditions as aforesaid shall preclude Lender from exercising its
option to cause the whole Loan to become immediately due and payable by reason
of Grantor's default in keeping or performing any such covenants, agreements or
conditions.

                  (c)      Lender has approved a form of Occupancy Lease to be
used by Grantor in connection with the Property (the "FORM LEASE"). Grantor
shall not, without the prior written consent of Lender, modify or alter the Form
Lease in any material respect. In addition, Grantor shall not, without the prior
written consent of Lender, surrender, terminate, modify or alter, either orally
or in writing, any Occupancy Lease now existing or hereafter made with any Major
Tenant (as hereinafter defined) for all or part of the Property, permit an
assignment or sublease of any such Occupancy Lease, or request or consent to the
subordination of any Occupancy Lease to any lien subordinate to this Deed of
Trust. Grantor shall furnish Lender with copies of all executed Occupancy Leases
of all or any part of the

                                                            Germantown, Maryland

                                       19



Property now existing or hereafter made, and Grantor shall assign to Lender
(which assignment shall be in form and content acceptable to Lender), as
additional security for the Grantor's Guaranty and the Loan, all Occupancy
Leases now existing or hereafter made for all or any part of the Property.

                  (d)      Notwithstanding the foregoing approval by Lender of
Grantor's Form Lease, Lender hereby specifically reserves the right to approve
all prospective tenants under all Occupancy Leases hereafter proposed to be made
if either: (i) the term thereof, excluding options to renew the same, exceeds
five years; or (ii) the net rentable area to be occupied thereunder, including
expansion options, exceeds ten percent (10%) of the net leasable area of each of
the buildings comprising the Improvements (the tenants under such leases being
hereinafter referred to as "MAJOR TENANTS"). Grantor shall notify Lender in
writing of all prospective Major Tenants, and shall deliver to Lender, at
Grantor's sole cost and expense, a copy of the prospective Major Tenant's
current financial statement and the most recent Dun & Bradstreet credit report
on said prospective Major Tenant. The financial statement delivered to Lender
hereunder shall be certified as true and correct by the Major Tenant, or, if
available, by a certified public accountant.

                  (e)      In no event shall Grantor exercise any right to
relocate any tenant outside the Property pursuant to any right set forth in an
Occupancy Lease without the prior written consent of Lender.

         13.      MAINTENANCE OF PARKING & ACCESS; PROHIBITION AGAINST
ALTERATION; SEPARATE TAX LOT.

                  (a)      Grantor shall construct, keep and constantly
maintain, as the case may be, all curbs, drives, parking areas and the number of
parking spaces heretofore approved by Lender, or heretofore or hereafter
required by any Laws or any governmental body, agency or authority having
jurisdiction over Grantor or the Property, and as required by the terms of the
Occupancy Leases, and not to alter, erect, build or construct upon any portion
of the Property, any building, structure or improvement of any kind whatsoever,
the erection, building or construction of which has not been previously approved
by Lender in writing, which approval shall be at the sole discretion of Lender.

                  (b)      Grantor shall cause the Property to remain separately
assessed for real estate tax purposes as a separate tax lot or lots.

         14.      EXECUTION OF ADDITIONAL DOCUMENTS. Grantor shall do, make,
execute, acknowledge, witness and deliver all deeds, conveyances, mortgages,
deeds of trust, assignments, estoppel certificates, subordination
non-disturbance and attornments, notices of assignments, transfers, assurances,
security agreements, financing statements and renewals thereof, and all other
instruments or other acts necessary, as Lender shall from time to time

                                                            Germantown, Maryland

                                       20



require for the purpose of better assuring, conveying, assigning, transferring,
securing and confirming unto Lender the Property and rights hereby encumbered,
created, conveyed, assigned or intended now or hereafter so to be encumbered,
created, conveyed or assigned, or which Grantor may now be or may hereafter
become bound to encumber, create, convey or assign to Lender, or for the purpose
of carrying out the intention or facilitating the performance of the terms of
this Deed of Trust, or for filing, registering or recording this Deed of Trust,
and to pay all filing, registration or recording fees and all taxes, costs and
other expenses, including Reasonable Attorneys' Fees, incident to the
preparation, execution, acknowledgment, delivery and recordation of any of the
same. By signing this Deed of Trust, Grantor authorizes Lender to file such
financing statements, with or without the signature of Grantor, as Lender may
elect, as may be necessary or desirable to perfect the lien of Lender's security
interest in the Fixtures and Personal Property. Without limiting any other
provision herein, Grantor hereby authorizes Lender to file one or more financing
statements and any renewal or continuation statements thereof, describing the
Property and the proceeds of the Property, including, without limitation, a
financing statement covering "all assets of Grantor all proceeds therefrom, and
all rights and privileges with respect thereto." Grantor further authorizes
Lender to file, with or without any additional signature from Grantor, as Lender
may elect, such amendments and continuation statements as Lender may deem
necessary or desirable from time to time to perfect or continue the lien of
Lender's security interest in the Fixtures and Personal Property. Grantor hereby
ratifies any financing statements that may have been filed by Lender in advance
of the date hereof to perfect Lender's security interest in the Fixtures and
Personal Property.

         15.      AFTER-ACQUIRED PROPERTY SECURED. Grantor shall
subject to the lien of this Deed of Trust all right, title and interest of
Grantor in and to all extensions, improvements, betterments, renewals,
substitutions and replacements of, and all additions and appurtenances to, the
Property hereinabove described, hereafter acquired by or released to Grantor, or
constructed, assembled or placed by Grantor on the Real Property, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, deed of trust,
encumbrance, conveyance, assignment or other act by Grantor, as fully,
completely and with the same effect as though now owned by Grantor and
specifically described herein, but at any and all times, Grantor will execute
and deliver to Lender any and all such further assurances, mortgages, deeds of
trust, conveyances, security agreements, financing statements or assignments
thereof or security interests therein as Lender may reasonably require for the
purpose of expressly and specifically subjecting the same to the lien of this
Deed of Trust.

         16.      PAYMENTS BY LENDER ON BEHALF OF GRANTOR. Grantor shall make
payment of any taxes, assessments or public charges on or with respect to the
Property before the same shall become delinquent, or to make payment of any
insurance premiums or other charges, impositions, or liens herein or elsewhere
required to be paid by Grantor, or if

                                                            Germantown, Maryland

                                       21



Grantor shall fail so to do, then Lender, at its sole option, but without
obligation to do so, may make payment or payments of the same and also may
redeem the Property from tax sale without any obligation to inquire into the
validity of such taxes, assessments, charges, impositions or liens. In the case
of any such payment by Lender, Grantor agrees to reimburse Lender, upon demand
therefor, the amount of such payment and of any fees and expenses attendant in
making the same, together with interest thereon at the lesser of either: (a) the
highest rate of interest then allowed by the Laws of the State or, if
controlling, the Laws of the United States, or (b) the then applicable interest
rate of the Note plus five hundred (500) basis points per annum; and until paid
such amounts and interest shall be added to and become part of the Loan to the
same extent that this Deed of Trust secures the repayment of the Loan. In making
payments authorized by the provisions of this Section 16, Lender may do so
whenever, in Lender's sole judgment and discretion, such advance or advances are
necessary or desirable to protect the full security intended to be afforded by
this Deed of Trust. Neither the right nor the exercise of the rights herein
granted to Lender to make any such payments as aforesaid shall preclude Lender
from exercising its option to cause the Loan to become immediately due and
payable by reason of Grantor's default in making such payments as hereinabove
required.

         17.      FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE
PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this
Deed of Trust, Grantor shall deposit with Lender, together with and in addition
to each monthly payment due on account of the Loan, an amount equal to
one-twelfth (1/12th) of the annual total of such taxes, assessments, insurance
premiums and other charges (all as estimated by Lender in its sole discretion)
so that, at least thirty (30) days prior to the due date thereof, Lender shall
be able to pay in full all such taxes, assessments, insurance premiums and other
charges as the same shall become due. Lender may hold the sums so deposited
without paying interest, commingle same with its general funds and/or apply the
same to the payment of said taxes, assessments, insurance premiums or other
charges as they become due and payable. If at any time the funds so held by
Lender are insufficient to pay such taxes, assessments, insurance premiums or
other charges as they become due and payable, Grantor shall immediately, upon
Written Notice and demand by Lender, deposit with Lender the amount of such
deficiency. The failure on the part of Grantor to do so shall entitle Lender, at
Lender's sole option, to make such payments in accordance with the rights and
pursuant to the conditions elsewhere provided in this Deed of Trust. Grantor
hereby grants to Lender a security interest in all funds deposited with Lender,
and such funds are hereby pledged by Grantor to Lender for the purpose of
securing all indebtedness and obligations secured by this Deed of Trust.
Whenever any default exists under this Deed of Trust, Lender may, at Lender's
sole option but without an obligation so to do, apply any funds so held by
Lender pursuant to this Section 17 toward the payment of the Loan,
notwithstanding the fact that the amount owing thereon may not then be due and
payable or that the Loan may otherwise be adequately secured, in such order and
manner of application as Lender may elect.

                                                            Germantown, Maryland

                                       22



         18.      CONDEMNATION; EMINENT DOMAIN. All claims and rights of action
for, and all awards and other compensation heretofore or hereafter made to
Grantor and all subsequent owners of the Property in any taking by eminent
domain, recovery for inverse condemnation or by deed in lieu thereof, whether
permanent or temporary, of all or any part of the Property or any easement or
any appurtenance thereto, including severance and consequential damages and
change in grade of any way, street, avenue, road, alley, passage or public
place, are hereby assigned to Lender. Grantor hereby irrevocably appoints Lender
as its attorney-in-fact, coupled with an interest, and authorizes, directs and
empowers Lender, at the option of Lender as said attorney-in-fact, on behalf of
Grantor, its successors and assigns, to adjust or compromise the claim for any
such award, and alone to collect and receive the proceeds thereof, to give
proper receipts and acquittances therefor and, after deducting any expenses of
collection, Lender shall at its sole option either:

                  (a)      apply the net proceeds as a credit upon any portion
of the Loan, as selected by Lender, notwithstanding the fact that the amount
owing thereon may not then be due and payable, or that the Loan is otherwise
adequately secured. In the event Lender applies such awards to the reduction of
the outstanding Loan guaranteed by the Grantor's Guaranty, such proceeds shall
be applied at par, and the monthly installments due and payable under the Note
shall be reduced accordingly as calculated by Lender; however no such
application shall serve to cure an existing default in the payment of the Note
or the Grantor's Guaranty; or

                  (b)      hold said proceeds without any allowance of interest,
and make the same available for restoration or rebuilding of the Improvements.
In the event that Lender makes said proceeds available to reimburse Grantor for
the cost of the restoration or rebuilding of the Improvements on the Real
Property, such proceeds shall be made available in the manner and under the same
conditions as required under Section 8 hereof. If the proceeds are made
available by Lender to reimburse Grantor for the cost of said restoration or
rebuilding, any surplus which may remain out of said award after payment of such
cost of restoration or rebuilding, shall be applied on account of the Loan at
par notwithstanding the fact that the amount owing thereon may not then be due
and payable or that the Loan may otherwise be adequately secured.

         In the event of a taking or condemnation, provided that Grantor is not
then in default hereunder beyond the expiration of applicable notice and cure
periods, then notwithstanding any provision of this Section 19 to the contrary,
Lender shall make condemnation proceeds available for restoration of the
Property to the extent required under the terms of the Borders Lease.

         Grantor further covenants and agrees to give Lender immediate notice of
the actual or threatened commencement of any proceedings under eminent domain,
and to deliver to Lender copies of any and all papers served in connection with
any such proceedings. Grantor further covenants and agrees to make, execute and
deliver to Lender, at any time or times, upon

                                                            Germantown, Maryland

                                       23



request, free, clear and discharged of any encumbrance of any kind whatsoever,
any and all further assignments and/or other instruments deemed necessary by
Lender for the purpose of validly and sufficiently assigning all such awards and
other compensation heretofore or hereafter made to Lender (including the
assignment of any award from the United States government at any time after the
allowance of the claim therefor, the ascertainment of the amount thereof and the
issuance of the warrant for payment thereof).

         It shall be a default hereunder if either: (i) any part of any of the
Improvements situated on the Real Property shall be condemned by any
governmental authority having jurisdiction; or (ii) lands constituting a portion
of the Real Property shall be condemned by any governmental authority having
jurisdiction, such that the remaining Property is in violation of applicable
parking, zoning, platting, or other ordinances, or fails to comply with the
terms of the Occupancy Leases with Major Tenants. In either of said events,
Lender shall be entitled to exercise any or all remedies provided or referenced
in this Deed of Trust or the other Loan Documents, including the application of
condemnation proceeds to the outstanding principal balance of the Note at par,
and the right to accelerate the maturity date of the Note and require payment in
full without the imposition of a Prepayment Premium.

         19.      COSTS OF COLLECTION. In the event that the Note or the
Grantor's Guaranty is placed in the hands of an attorney for collection, or in
the event that Lender shall become a party either as plaintiff or as defendant,
in any action, suit, appeal or legal proceeding (including, without limitation,
foreclosure, condemnation, bankruptcy, administrative proceedings or any
proceeding wherein proof of claim is by law required to be filed), hearing,
motion or application before any court or administrative body in relation to the
Property or the lien and security interest granted or created hereby or herein,
or for the recovery or protection of the Loan or the Property, or for the
foreclosure of this Deed of Trust, or for the enforcement of the terms and
conditions of the Loan Documents, Grantor shall indemnify, save, defend and hold
Lender harmless from and against any and all Losses incurred by Lender on
account thereof, and Grantor shall repay, on demand, all such Losses, together
with interest thereon until paid at the lesser of either (a) the highest rate of
interest then allowed by the Laws of the State, or, if controlling, the Laws of
the United States, or (b) the then applicable rate of interest of the Note plus
five hundred (500) basis points per annum; all of which sums, if unpaid, shall
be added to and become a part of the Loan.

         20.      DEFAULT RATE. Any sums not paid when due, whether maturing by
lapse of time or by reason of acceleration under the provisions of the Note, the
Grantor's Guaranty, this Deed of Trust, or any of the other Loan Documents, and
whether principal, interest or money owing for advancements pursuant to the
terms of this Deed of Trust or any other Loan Document, shall bear interest
until paid at the lesser of either (a) the highest rate of interest then allowed
by the Laws of the State, or, if controlling, the Laws of the United States, or
(b) the then applicable rate of interest of the Note plus five hundred (500)
basis points per annum; all of which sums shall be added to and become a part of
the Loan.

                                                            Germantown, Maryland

                                       24



         21.      SAVINGS CLAUSE. Notwithstanding any provisions in the Note,
the Grantor's Guaranty, or in this Deed of Trust to the contrary, the total
liability for payments in the nature of interest, including but not limited to
Prepayment Premiums, default interest and late payment charges, shall not exceed
the limits imposed by the Laws of the State or, if controlling, the Laws of the
United States, relating to maximum allowable charges of interest. Lender shall
not be entitled to receive, collect or apply, as interest on the Loan, any
amount in excess of the maximum lawful rate of interest permitted to be charged
by any Laws. In the event Lender ever receives, collects or applies as interest
any such excess, such amount which would be excessive interest shall be applied
to reduce the unpaid principal balance of the Loan evidenced by the Note and
guaranteed by the Grantor's Guaranty. If the unpaid principal balance of such
Loan has been paid in full, any remaining excess shall be forthwith returned to
Grantor.

         22.      BANKRUPTCY, REORGANIZATION OR ASSIGNMENT.

                  (a)      It shall be a default hereunder if Borrower or
Grantor or any general partner or managing member of Borrower or Grantor shall:
(a) elect to dissolve or liquidate its business organization or wind up its
business affairs without receiving the prior written approval of Lender; (b)
consent to the appointment of a receiver, trustee or liquidator of all or a
substantial part of its assets; (c) be adjudicated as bankrupt or insolvent, or
file a voluntary petition in bankruptcy, or admit in writing its inability to
pay its debts as they become due; (d) make a general assignment for the benefit
of creditors; (e) file a petition under or take advantage of any insolvency law;
(f) file an answer admitting the material allegations of a petition filed
against Borrower or Grantor or any general partner or managing member of
Borrower or Grantor in any bankruptcy, reorganization or insolvency proceeding,
or fail to cause the dismissal of such petition within thirty (30) days after
the filing of said petition; (g) take action for the purpose of effecting any of
the foregoing; or (h) if any order, judgment or decree shall be entered upon an
application of a creditor of Borrower or Grantor or any general partner or
managing member of Borrower or Grantor by a court of competent jurisdiction
approving a petition seeking appointment of a receiver or trustee of all or a
substantial part of Borrower's or Grantor's assets or any of Borrower's or
Grantor's general partner's or managing member's assets and such order, judgment
or decree shall continue unstayed and in effect for a period of thirty (30)
days.

                  (b)      Grantor covenants and agrees that it has not and
shall not:

                           (i)      engage in any business or activity other
         than the acquisition, ownership, operation and maintenance of the
         Property, and activities incidental thereto;

                           (ii)     acquire or own any material asset other than
         (1) the Property, and (2) such incidental Fixtures and Personal
         Property as may be necessary for the operation of the Property;

                                                            Germantown, Maryland

                                       25



                           (iii)    merge into or consolidate with any person or
         entity or dissolve, terminate or liquidate in whole or in part,
         transfer or otherwise dispose of all or substantially all of its assets
         or change its legal structure, without in each case Lender's consent;

                           (iv)     fail to preserve its existence as an entity
         duly organized, validly existing and in good standing under the laws of
         the jurisdiction of its organization or formation, or without the prior
         written consent of Lender, amend, modify, terminate or fail to comply
         with the provisions of Grantor's Governing Documents (as hereafter
         defined);

                           (v)      own any subsidiary or make any investment in
         or acquire the obligations or securities of any other person or entity
         without the consent of Lender;

                           (vi)     commingle its assets with the assets of any
         of its partner, members, shareholders, affiliates, or of any other
         person or entity or transfer any assets to any such person or entity
         other than distributions on account of equity interests in the Grantor
         permitted hereunder and properly accounted for;

                           (vii)    incur any debt, secured or unsecured, direct
         or contingent (including guaranteeing any obligation, other than the
         Loan and the Affiliate Loans), other than the Loan, except unsecured
         trade and operational debt incurred with trade creditors in the
         ordinary course of its business of owning and operating the Property in
         such amounts as are normal and reasonable under the circumstances,
         provided that such debt is not evidenced by a note and is paid when due
         and provided in any event the outstanding principal balance of such
         debt shall not exceed at any one time 1% of the outstanding Loan.
         Grantor shall not be deemed in default of the foregoing restrictions by
         virtue of any guaranty delivered by Grantor with respect to the
         Affiliate Loans;

                           (viii)   allow any person or entity to pay its debts
         and liabilities (except the Borrower or a Guarantor - or in connection
         with the cross-default and cross collateralization of the Affiliate
         Loans) or fail to pay its debts and liabilities solely from its own
         assets;

                           (ix)     fail to maintain its records, books of
         account and bank accounts separate and apart from those of the
         shareholders, partners, members, principals and affiliates of Grantor,
         the affiliates of a shareholder, partner or member of Grantor, and any
         other person or entity or fail to prepare and maintain its own
         financial statements in accordance with generally accepted accounting
         principles and susceptible to audit, or if such financial statements
         are consolidated fail to cause such financial statements to contain
         footnotes disclosing that the Property is actually owned by the
         Grantor;

                                                            Germantown, Maryland

                                       26



                           (x)      enter into any contract or agreement with
         any shareholder, partner, member, principal or affiliate of Grantor,
         any guarantor of all or a portion of the Loan (a "GUARANTOR") or any
         shareholder, partner, member, principal or affiliate thereof, except
         upon terms and conditions that are intrinsically fair and substantially
         similar to those that would be available on an arms-length basis with
         third parties other than any shareholder, partner, member, principal or
         affiliate of Grantor or Guarantor, or any shareholder, partner, member,
         principal or affiliate thereof;

                           (xi)     seek dissolution or winding up, in whole or
         in part;

                           (xii)    fail to correct any known misunderstandings
         regarding the separate identity of Grantor;

                           (xiii)   hold itself out to be responsible or pledge
         its assets or credit worthiness for the debts of another person or
         entity or allow any person or entity to hold itself out to be
         responsible or pledge its assets or credit worthiness for the debts of
         the Grantor (except for a Guarantor);

                           (xiv)    make any Loan or advances to any third
         party, including any shareholder, partner, member, principal or
         affiliate of Grantor, or any shareholder, partner, member, principal or
         affiliate thereof, except as may be required in connection with the
         cross default and cross collateralization of the Affiliate Loans;

                           (xv)     fail to file its own tax returns, if
         required under applicable law, or to use separate contracts, purchase
         orders, stationary, invoices and checks, except that Grantor may file a
         consolidated tax return with Agree Limited Partnership for reporting
         purposes;

                           (xvi)    fail either to hold itself out to the public
         as a legal entity separate and distinct from any other entity or person
         or to conduct its business solely in its own name in order not (1) to
         mislead others as to the entity with which such other party is
         transacting business, or (2) to suggest that Grantor is responsible for
         the debts of any third party (including any shareholder, partner,
         member, principal or affiliate of Grantor, or any shareholder, partner,
         member, principal or affiliate thereof);

                           (xvii)   fail to allocate fairly and reasonably among
         Grantor and any third party (including, without limitation, any
         Guarantor) any overhead for common employees, shared office space or
         other overhead and administrative expenses;

                           (xviii)  allow any person or entity to pay the
         salaries of its own employees or fail to maintain a sufficient number
         of employees for its contemplated business operations;

                                                            Germantown, Maryland

                                       27



                           (xix)    fail to maintain adequate capital for the
         normal obligations reasonably foreseeable in a business of its size and
         character and in light of its contemplated business operations;

                           (xx)     share any common logo with or hold itself
         out as or be considered as a department or division of (1) any
         shareholder, partner, principal, member or affiliate of Grantor, (2)
         any affiliate of a shareholder, partner, principal, member or affiliate
         of Grantor, or (3) any other person or entity or allow any person or
         entity to identify the Grantor as a department or division of that
         person or entity; or

                           (xxi)    conceal assets from any creditor, or enter
         into any transaction with the intent to hinder, delay or defraud
         creditors of the Grantor or the creditors of any other person or
         entity.

         23.      TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It
is understood by Grantor that time is of the essence hereof in connection with
all obligations of Grantor herein, in the Grantor's Guaranty, the Assignment,
and any of the other Loan Documents.

         Lender, at its sole option, may declare the Loan, as well as all other
monies secured or evidenced hereby or by any of the other Loan Documents,
including, without limitation, all Prepayment Premiums (to the extent permitted
by the Laws of the State) and late payment charges, to be in default and
forthwith due and payable, in the event:

                           (1)      Borrower or Grantor defaults in the payment
         of any monthly installment of the Note or the Grantor's Guaranty,
         whether of principal or interest, or both, or in the payment of any
         other sums of money referred to herein or in the Note, Grantor's
         Guaranty, or in any of the other Loan Documents, or in any of the
         documents evidencing, guarantying, or securing the repayment of the
         Affiliate Loans, including, but not limited to, that certain Indemnity
         Deed of Trust and Security Agreement executed by the Grantor as a
         second priority lien on the Deed of Trust Property (collectively, the
         "AFFILIATE LOAN DOCUMENTS"), promptly and fully when the same shall be
         due, without notice or demand from Lender to Grantor in regard to such
         Monetary Default (as hereinafter defined), and any such Monetary
         Default remains uncured for a period of five (5) days after Written
         Notice thereof has been given by Lender to Grantor, unless Lender has
         previously given Grantor such Written Notice for a failure to pay in
         the then-current Loan Year (as defined in the Note), in which event no
         such notice need be given and no right to cure need be afforded Grantor
         as to any further Monetary Default during such Loan Year.

                           (2)      Borrower or Grantor breaches or defaults on
         any of the terms, covenants, conditions and agreements of the Note, the
         Grantor's Guaranty, this Deed

                                                            Germantown, Maryland

                                       28



         of Trust, or any other Loan Documents or any of the Affiliate Loan
         Documents; or in the event that each and every one of said terms,
         covenants, conditions and agreements is not otherwise either duly,
         promptly and fully discharged or performed, and any such Non-Monetary
         Default (as hereinafter defined) remains uncured for a period of thirty
         (30) days after Written Notice thereof has been delivered from Lender
         to Grantor; unless such Non-Monetary Default cannot be cured within
         said thirty (30) day period, in which event Borrower or Grantor shall
         have a reasonable period of time to complete cure, provided that action
         to cure such Non-Monetary Default is promptly commenced within said
         thirty (30) day period, and Grantor is, in Lender's sole judgment, not
         diminishing or impairing the value of the Property, and is diligently
         pursuing a cure to completion, but in no event longer than ninety (90)
         days.

                           (3)      Any representation or warranty of Borrower
         or Grantor or their respective members, general partners, principals,
         affiliates, agents or employees, or of any Guarantor made herein or in
         or in any other Loan Document or any of the Affiliate Loan Documents,
         in any guaranty, or in any certificate, report, financial statement or
         other instrument or document furnished to Lender shall have been false
         or misleading in any material respect when made.

                           (4)      Any seizure or forfeiture of the Property,
         or any portion thereof, or Grantor's interest therein, resulting from
         criminal wrongdoing or other unlawful action of Grantor, its
         affiliates, or any tenant in the Property under any federal, state or
         local law.

                           (5)      If Grantor consummates a transaction which
         would cause this Deed of Trust or Lender's exercise of its rights under
         this Deed of Trust, the Note, the Grantor's Guaranty, or the other Loan
         Documents to constitute a nonexempt prohibited transaction under ERISA
         or result in a violation of a state statute regulating governmental
         plans, subjecting Lender to liability for a violation of ERISA or a
         state statute.

                           (6)      Any default occurs in the performance of any
         covenant or obligation of Borrower or Grantor or any other party under
         any indemnity or guaranty delivered to Lender in connection with the
         Loan and such default continues beyond the expiration of applicable
         notice and cure periods.

                           (7)      Any default occurs under the Affiliate Loans
         which default continues beyond the expiration of applicable notice and
         cure periods.

         Upon the occurrence of any one of the above events, and at the option
of Lender, the principal of and the interest accrued on the Loan and all other
sums secured by this Deed of Trust and the other Loan Documents shall
immediately become due and payable as if all of said

                                                            Germantown, Maryland

                                       29



sums of money were originally stipulated to be paid on such day. In addition,
Lender may avail itself of all rights and remedies provided by law or equity,
and may foreclose or prosecute a suit at law or in equity as if all monies
secured hereby had matured prior to its institution, anything in this Deed of
Trust or any of the other Loan Documents to the contrary notwithstanding. Lender
shall have no obligation to give Grantor notice of, or any period to cure, any
Monetary Default or any Incurable Default (as hereinafter defined) prior to
exercising its rights, powers, privileges and remedies.

         As used herein, the term "MONETARY DEFAULT" shall mean any default
which can be cured by the payment of money such as, but not limited to, the
payment of principal and interest due under the Note and Grantor's Guaranty, or
the payment of taxes, assessments and insurance premiums when due as provided in
this Deed of Trust. As used herein, the term "NON-MONETARY DEFAULT" shall mean
any default that is not a Monetary Default or an Incurable Default. As used
herein, the term "INCURABLE DEFAULT" shall mean either: (i) any voluntary or
involuntary sale, assignment, mortgaging, encumbering or transfer in violation
of the covenants contained herein or any of the other Loan Documents; or (ii) if
Borrower or Grantor, or any person or entity comprising Borrower or Grantor or
any guarantor or indemnitor of the Loan, should breach any of the provisions of
Section 22.

         24.      FORECLOSURE. Upon the occurrence of a default hereunder,
Lender may institute an action to foreclose this Deed of Trust as to the amount
so declared due and payable, and thereupon the Property (or any portion thereof)
shall be sold according to law to satisfy and pay the same, together with all
costs, expenses and allowances thereof, including, without limitation,
Reasonable Attorneys' Fees. The Property may be sold in one parcel, several
parcels or groups of parcels, and Lender shall be entitled to bid at the sale,
and, if Lender is the highest bidder for the Property or any part or parts
thereof, Lender shall be entitled to purchase the same. The failure or omission
on the part of Lender to exercise the option for acceleration of maturity of the
Note and foreclosure of this Deed of Trust following any default as aforesaid or
to exercise any other option or remedy granted hereunder to Lender when entitled
to do so in any one or more instances, or the acceptance by Lender of partial
payment of the Loan, whether before or subsequent to Grantor's default
hereunder, shall not constitute a waiver of any such default or the right to
exercise any such option or remedy, but such option or remedy shall remain
continuously in force. Acceleration of the maturity of the Note, once claimed
hereunder by Lender, at the option of Lender, may be rescinded by written
acknowledgment to that effect by Lender, but the tender and acceptance of
partial payments alone shall not in any way either affect or rescind such
acceleration of maturity, nor act as a waiver, accord and satisfaction,
modification, novation or similar defense.'


                                                            Germantown, Maryland

                                       30


         25.      UCC REMEDIES.

                  (a)      This Deed of Trust constitutes a Security Agreement
under the UCC with respect to any part of the Property that may or might now or
hereafter be or be deemed to be personal property, fixtures or property other
than real estate, 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:

                           (1)      No financing statement covering any of the
         Property or any proceeds thereof is on file in any public office; and
         Borrower will, at its cost and expense, upon demand, furnish to Lender
         such further information and will execute and deliver to Lender such
         financing statements and other documents in form reasonably
         satisfactory to Lender and will do all such acts and things as Lender
         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 Property as security for the Loan,
         subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or
         desirable;

                           (2)      The terms and provisions contained in this
         section and in Section 25(b) of this Deed of Trust shall, unless the
         context otherwise requires, have the meanings and be construed as
         provided in the UCC;

                           (3)      This Deed of Trust constitutes a security
         agreement and financing statement under the UCC with respect to the
         Property. As such, this Deed of Trust covers any portion of the
         Property that is personal property including all items which are to
         become fixtures. Borrower is the "Debtor" and Lender is the "Secured
         Party" (as those terms are defined and used in the UCC) insofar as this
         Deed of Trust constitutes a financing statement.

                  (b)      Upon the occurrence of a default, Lender may exercise
its rights of enforcement with respect to the Fixtures and Personal Property
under the UCC, and in conjunction with, in addition to or in substitution for
those rights and remedies:

                           (1)      Written Notice mailed to Grantor as provided
         herein ten (10) days prior to the date of public sale of the Fixtures
         and Personal Property or prior to the date after which private sale of
         the Fixtures and Personal Property will be made shall constitute
         reasonable notice;

                           (2)      any sale made pursuant to the provisions of
         this Section shall be deemed to have been a public sale conducted in a
         commercially reasonable manner if held contemporaneously with the sale
         of the Deed of Trust Property under power of sale as provided herein
         upon giving the same notice with respect to the sale of the

                                                            Germantown, Maryland

                                       31



         Fixtures and Personal Property hereunder as is required for such sale
         of the Deed of Trust Property under power of sale;

                           (3)      in the event of a foreclosure sale, whether
         made under the terms hereof, or under judgment of a court, the Fixtures
         and Personal Property and the Deed of Trust Property may, at the option
         of Lender, be sold as a whole;

                           (4)      it shall not be necessary that Lender take
         possession of the Fixtures and Personal Property or any part thereof
         prior to the time that any sale pursuant to the provisions of this
         Section is conducted and it shall not be necessary that the Fixtures
         and Personal Property or any part thereof be present at the location of
         such sale;

                           (5)      prior to application of proceeds of
         disposition of the Fixtures and Personal Property to the secured
         indebtedness, such proceeds shall be applied to the reasonable expenses
         of retaking, holding, preparing for sale or lease, selling, leasing and
         the like and the Reasonable Attorneys' Fees and other legal expenses
         incurred by Lender;

                           (6)      any and all statements of fact or other
         recitals made in any bill of sale or assignment or other instrument
         evidencing any foreclosure sale hereunder as to nonpayment of the
         indebtedness or as to the occurrence of any default, or as to Lender
         having declared all of such indebtedness to be due and payable, or as
         to notice of time, place and terms of sale and of the properties to be
         sold having been duly given, or as to any other act or thing having
         been duly done by Lender, shall be taken as prima facie evidence of the
         truth of the facts so stated and recited;

                           (7)      Lender may appoint or delegate any one or
         more persons as agent to perform any act or acts necessary or incident
         to any sale held by Lender, including the sending of notices and the
         conduct of the sale, but in the name and on behalf of Lender; and

                           (8)      this Deed of Trust covers Goods which are or
         are to become Fixtures related to the Real Property, and covers
         As-Extracted Collateral related to the Real Property. A carbon,
         photographic or other reproduction of this Deed of Trust or of any
         financing statement relating to this Deed of Trust shall be sufficient
         as a financing statement. This Deed of Trust shall be effective as a
         financing statement filed as a fixture filing with respect to all
         fixtures included within the Property and is to be filed for record in
         the real estate records in the Office of the County Clerk where the
         Property (including said fixtures) is situated. This Deed of Trust
         shall also be effective as a financing statement As-Extracted
         Collateral with respect to all As-Extracted Collateral included within
         the Real Property (including, without limitation, all oil, gas,

                                                            Germantown, Maryland

                                       32



         other minerals, and other substances of value which may be extracted
         from the earth and all accounts arising out of the sale at the wellhead
         or minehead thereof), and is to be filed for record in the real estate
         records of the county where the Property is situated. The mailing
         address of Grantor is set forth in Section 43 of this Deed of Trust and
         the address of Lender from which information concerning the security
         interest may be obtained is the address of Lender set forth in Section
         43 of this Deed of Trust.

         26.      PROTECTION OF LENDER'S SECURITY. At any time after default
hereunder, Lender, or Lender's agents or contractors, is authorized, without
notice and in Lender's sole discretion, to enter upon and take possession of the
Property or any part thereof, and to perform any acts which Lender deems
necessary or proper to conserve the security interest herein intended to be
provided by the Property, to operate any business or businesses conducted
thereon, and to collect and receive all Rents thereof and therefrom, including
those past due as well as those accruing thereafter.

         27.      APPOINTMENT OF RECEIVER. If, at any time after a default
hereunder, Lender deems, in Lender's sole discretion, that a receivership may be
necessary to protect the Property or its Rents, whether before or after maturity
of the Note and whether before or at the time of or after the institution of
foreclosure or suit to collect the Loan or to enforce this Deed of Trust or any
of the other Loan Documents, Lender, as a matter of strict right and regardless
of the value of the Property or the amounts due hereunder or secured hereby, or
of the solvency of any party bound for the payment of such indebtedness, shall
have the right, upon ex parte application and without notice to anyone, and by
any court having jurisdiction, to the appointment of a receiver to take charge
of, manage, preserve, protect and operate the Property, to collect the Rents
thereof, to make all necessary and needful repairs, and to pay all taxes,
assessments, insurance premiums and other such charges against and expenses of
the Property, and to do such other acts as may by such court be authorized and
directed, and after payment of the expenses of the receivership and the
management of the Property, to apply the net proceeds of such receivership in
reduction of the Loan or in such other manner as the said court shall direct
notwithstanding the fact that the amount owing thereon may not then be due and
payable or the said Loan is otherwise adequately secured. Such receivership
shall, at the option of Lender, continue until full payment of all sums hereby
secured or until title to the Property shall have passed by sale under this Deed
of Trust. Grantor hereby specifically waives its right to object to the
appointment of a receiver as aforesaid, and hereby expressly agrees that such
appointment shall be made as an admitted equity and as a matter of absolute
right to Lender.

         28.      RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The
rights and remedies herein provided are cumulative, and Lender, as the holder of
the Note and the Grantor's Guaranty and of every other obligation secured
hereby, may recover judgment thereon, issue execution therefor and resort to
every other right or remedy available at law or in equity, without first
exhausting any right or remedy available to

                                                            Germantown, Maryland

                                       33



Lender and without affecting or impairing the security of any right or remedy
afforded hereby, and no enumeration of special rights or powers by any
provisions hereof shall be construed to limit any grant of general rights or
powers, or to take away or limit any and all rights granted to or vested in
Lender by law or equity. Grantor further agrees that no delay or omission on the
part of Lender to exercise any rights or powers accruing to it hereunder shall
impair any such right or power, or shall be construed to be a waiver of any such
default hereunder or an acquiescence therein; and every right, power and remedy
granted herein or by law or equity to Lender may be exercised from time to time
as often as Lender deems expedient.

         Lender may resort to any security given by this Deed of Trust or to any
other security now existing or hereafter given to secure the payment of the
Loan, in whole or in part, and in such portions and in such order as may seem
best to Lender in its sole discretion, and any such action shall not be
considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Deed of Trust. To the full extent Grantor may do so,
Grantor agrees that Grantor will not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force pertaining to
the rights and remedies of sureties or providing for any appraisement,
valuation, stay, extension or redemption, and Grantor, for Grantor and Grantor's
heirs, devisees, representatives, successors and assigns, and for any and all
persons ever claiming any interest in the Property, to the extent permitted by
law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the secured indebtedness, notice of election to mature or declare
due the whole of the secured indebtedness and all rights to a marshaling of the
assets of Grantor, including the Property, or to a sale in inverse order of
alienation in the event of foreclosure of the liens and security interests
hereby created. Grantor shall not have or assert any right under any statute or
rule of law pertaining to the marshaling of assets, sale in inverse order of
alienation, the exemption of homestead, the administration of estates of
decedents or other matters whatever to defeat, reduce or affect the right of
Lender under the terms of this Deed of Trust to a sale of the Property for the
collection of the secured indebtedness without any prior or different resort for
collection, or the right of Lender under the terms of this Deed of Trust to the
payment of such indebtedness out of the proceeds of sale of the Property in
preference to every other claimant whatever. If any law referred to in this
Section and now in force, of which Grantor or Grantor's heirs, devisees,
representatives, successors and assigns and such other persons claiming any
interest in the Property might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not thereafter be
deemed to preclude the application of this Section.

         29.      MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without
notice and without regard to the consideration, if any, paid therefor, and
notwithstanding the existence at that time of any inferior mortgages, deeds of
trust, or other liens thereon, may release any part of the security described
herein, or may release any person or entity liable for the Loan without in any
way affecting the priority of this Deed of Trust, to the full extent of the Loan
remaining unpaid hereunder, upon any part of the security not

                                                            Germantown, Maryland

                                       34



expressly released. Lender may, at its option and within Lender's sole
discretion, also agree with any party obligated on the Loan, or having any
interest in the security described herein, to extend the time for payment of any
part or all of the Loan, and such agreement shall not, in any way, release or
impair this Deed of Trust, but shall extend the same as against the title of all
parties having any interest in said security, which interest is subject to this
Deed of Trust.

         30.      PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the
Property shall be Grantor, or such other manager as may be first approved in
writing by Lender. The exclusive leasing agent of the Property, if other than
Grantor or the foregoing party, shall be first approved in writing by Lender.
The management and leasing contracts (or in the absence of any such written
contract, a letter so stating and further identifying the name of the person or
entity charged with the responsibility for managing and/or leasing the Property)
shall be subordinate to this Deed of Trust, and satisfactory to and subject to
the prior written approval of Lender throughout the term of the Loan. Upon
default in either of these requirements, then the whole of the Loan hereby
secured shall, at the election of Lender, become immediately due and payable,
together with any Prepayment Premium, late payment charges and all other sums
required by the Note or the other Loan Documents, and Lender shall be entitled
to exercise any or all remedies provided for or referenced in this Deed of
Trust.

         31.      MODIFICATION NOT A WAIVER. In the event Lender (a) releases,
as aforesaid, any part of the security described herein or any person or entity
liable for the Loan; (b) grants an extension of time for the payment of the
Note; (c) takes other or additional security for the payment of the Note or the
Grantor's Guaranty; or (d) waives or fails to exercise any rights granted
herein, in the Note or the Grantor's Guaranty, or any of the other Loan
Documents, any said act or omission shall not release Grantor, subsequent
purchasers of the Property or any part thereof, or makers, sureties, endorsers
or guarantors of the Note, if any, from any obligation or any covenant of this
Deed of Trust, the Note, the Grantor's Guaranty, or any of the other Loan
Documents, nor preclude Lender from exercising any right, power or privilege
herein granted or intended to be granted in the event of any other default then
made, or any subsequent default.

         32.      TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER OR
GRANTOR; ASSUMPTION. Except as set forth in Section 38(b) hereof, without the
prior written consent of Lender, the sale, transfer, assignment or conveyance of
all or any portion of the Property, or the transfer, assignment or conveyance of
a controlling interest in Borrower or Grantor or their respective general
partners or managing members, or any guarantor, whether voluntary or by
operation of law, without the prior written consent of Lender, shall constitute
a default hereunder, and entitle Lender, at Lender's sole option, to accelerate
all sums due on the Note and the Grantor's Guaranty, together with any
Prepayment Premiums (to the extent permitted by the Laws of the State), late
payment charges or any other amounts secured hereby. Lender may, however, elect
to waive the option to

                                                            Germantown, Maryland

                                       35



accelerate granted hereunder if, prior to any such sale, transfer, assignment or
conveyance of the Property, the following conditions shall be fully satisfied:
(a) Lender acknowledges in writing that, in Lender's sole discretion, the
creditworthiness of the proposed transferee and the ability and experience of
the proposed transferee to operate the Property are satisfactory to Lender, (b)
Lender and the proposed transferee shall enter into an agreement in writing that
(i) the rate of interest payable on the Loan shall be at such rate as Lender
shall determine, (ii) the repayment schedule as set forth in the Note shall be
modified by Lender, in Lender's sole discretion, to initiate amortization or
modify the existing amortization schedule in order to amortize the then
remaining unpaid principal balance of the Note over a period of time as
determined by Lender, in Lender's sole discretion, without a change in the
maturity date of the Note, and (iii) the proposed transferee shall assume all
obligations of Borrower and Grantor under the Note, the Grantor's Guaranty, this
Deed of Trust and the other Loan Documents in writing and an assumption fee, to
be determined by Lender in Lender's sole discretion, may be charged by Lender;
(c) Lender shall receive, for Lender's review and approval, copies of all
transfer documents; and (d) Grantor or the transferee shall pay all costs and
expenses in connection with such transfer and assumption, including, without
limitation, all fees and expenses incurred by Lender.

         Grantor, or any subsequent owner of the Property or any portion
thereof, shall do all things necessary to preserve and keep in full force and
effect its and their legal existence, franchises, rights and privileges as a
corporation, partnership or limited liability company, as the case may be, under
the laws of the State of its formation and its right to own property and
transact business in the State. It shall be a default hereunder if Grantor, or
any subsequent owner of the Property or any portion thereof, shall amend,
modify, transfer, assign or terminate the applicable governing documents for
such entity, including its partnership agreement, certificate of partnership,
operating agreement, articles of organization, regulations, articles of
incorporation or bylaws, as the case may be (as applicable, the "GOVERNING
DOCUMENTS"), of Grantor or such subsequent owner without the prior written
consent of Lender. Grantor, or such subsequent owner of the Property, shall
provide Lender with copies of any proposed amendment to its applicable Governing
Documents, so that Lender may, in Lender's sole discretion, determine whether
such amendment adversely affects Lender, the Property or the security value
thereof. Provided, however, that any amendment, modification, transfer,
assignment or termination of Grantor's applicable Governing Documents or any
other action pursuant to which the current general partner or managing member of
Grantor shall either: (i) cease to be the general partner or managing member of
Grantor; or (ii) except to the extent permitted herein, cease to own or maintain
a partnership or membership interest in Grantor equal to or greater than its
partnership or membership interest at the time this Deed of Trust is executed,
shall be deemed to have a material adverse effect upon Lender and the Property,
and shall be a default hereunder.

         Grantor shall not change its name or identity in any manner which may
make any financing or continuation statement filed in connection with the Loan
seriously misleading

                                                            Germantown, Maryland

                                       36



within the meaning of the UCC enacted in the State or change its jurisdiction of
organization unless Grantor shall have delivered to Lender written notice
thereof not less than 30 days before the effective date of such change and shall
have taken all action which Lender determines to be reasonably necessary or
desirable to confirm and protect Lender's security interests and rights under
this Deed of Trust and the perfection and priority thereof. Grantor will not
change its principal places of business unless it shall have given Lender prior
written notice of its intent to do so not less than thirty (30) days in advance
of the effective date of such change. Grantor shall bear all costs incurred by
Lender in connection with any such change including, without limitation,
Reasonable Attorney's Fees.

         In the event the ownership of the Property, or any part thereof, shall
become vested in a person or entity other than Grantor, whether with or without
the prior written consent of Lender, Lender may, without notice to Grantor, deal
with such successor or successors in interest with reference to the Property,
this Deed of Trust and the other Loan Documents, in the same manner and to the
same extent as with Grantor without in any way vitiating or discharging
Grantor's liability hereunder or under any of the Loan Documents. No sale,
transfer or conveyance of the Property, no forbearance on the part of Lender and
no extension of time given by Lender to Grantor for the payment of the Note and
the Grantor's Guaranty shall operate to release, discharge, modify, change or
affect the original liability of Grantor, either in whole or in part, unless
expressly set forth in writing executed by Lender. Notwithstanding anything
contained herein to the contrary, Grantor hereby waives any right it now has or
may hereafter have to require Lender to prove an impairment of its security as a
condition to the exercise of Lender's rights under this Section 32.

         A sale, transfer, assignment or conveyance within the meaning of this
Section shall be deemed to include, but not be limited to, (a) an installment
sales agreement wherein Grantor agrees to sell the Property or any part thereof
for a price to be paid in installments; (b) an agreement by Grantor leasing all
or a substantial part of the Property for other than actual occupancy by a
tenant under an Occupancy Lease or a sale, assignment or other transfer of, or
the grant of a security interest in, Grantor's right, title and interest in and
to any leases or any Rents; (c) if Grantor, any guarantor, any indemnitor, or
any general partner or managing member of Grantor, is a corporation, the
voluntary or involuntary sale, conveyance, transfer or pledge of such
corporation's stock (or the stock of any corporation directly or indirectly
controlling such corporation by operation of law or otherwise), or the creation
or issuance of new stock by which an aggregate of more than ten percent (10%) of
such corporation's stock shall be vested in a party or parties who are not now
stockholders; and (d) if Grantor, any guarantor, indemnitor, or any general
partner or managing member of Grantor, is a limited partnership, general
partnership, limited liability partnership, limited liability company, or joint
venture, the change, removal or resignation of a general partner, managing
partner, or member, or the transfer or pledge of the interest of any general
partner, managing partner, or member or any profits or proceeds relating to such
interest. Nothing in this Deed of Trust shall be construed to limit or restrict
the transfer of shares of Agree Realty Corporation.

                                                            Germantown, Maryland

                                       37



         Notwithstanding anything contained in this Section 32 to the contrary,
as long as no default, or event which, with notice or the passage of time or
both, could result in a default, has occurred hereunder, under the Note, the
Grantor's Guaranty, or any of the other Loan Documents, Lender shall permit one
(1) bona fide arm's length transfer of the Property to another borrowing entity
without a change in the terms of the Loan; provided, however, that no such
transfer shall be valid or permitted hereunder unless: (i) Lender receives prior
Written Notice of such proposed transfer; (ii) such proposed transferee and any
substitute guarantor has been approved in writing by Lender (taking into
consideration such factors as transferee's creditworthiness, business
experience, financial condition and managerial capabilities); (iii) the
transferee's (and its sole general partner's or managing member's) single
purpose and bankruptcy remote character are satisfactory to Lender in its sole
discretion; (iv) Lender has obtained such other legal opinions regarding
substantive consolidation issues, enforceability of the assumption documents, no
adverse impact on the Securities or any REMIC holding the Note and the Grantor's
Guaranty and similar matters as Lender may require, (v) the execution and
delivery to Lender of a written assumption agreement covering the Note, the
Grantor's Guaranty, this Deed of Trust, and the other Loan Documents and/or
substitute guaranty (in Lender's sole and absolute discretion) and such
modifications to the Loan Documents executed by such parties and containing such
terms and conditions as Lender may require in its sole and absolute discretion
prior to such sale or transfer (provided that in the event the Loan is included
in a REMIC and are performing Loan, no modification to the terms and conditions
shall be made or permitted that would cause (A) any adverse tax consequences to
the REMIC or any holders of any Deed of Trust-Backed Pass-Through Securities,
(B) this Deed of Trust to fail to be a Qualifying Security Instrument under
applicable federal law relating to REMIC's, or (C) result in a taxation of the
income from the Loan to the REMIC or cause a loss of REMIC status), (vi) if
applicable, the delivery to Lender of an endorsement (at Grantor's sole cost and
expense) to Lender's policy of title insurance then insuring the lien created by
this Deed of Trust in form and substance acceptable to Lender in its sole
judgment; (vii) Lender is paid a cash assumption fee in accordance with the
following schedule: Two percent (2%) of the then outstanding principal balance
of the Note if such outstanding principal balance is less than or equal to Three
Million Dollars ($3,000,000.00), one and one-half percent (1 1/2%) of the then
outstanding principal balance of the Note if such outstanding principal balance
is in excess of Three Million Dollars ($3,000,000.00); (viii) Grantor pays all
fees and expenses incurred by Lender in connection with such transfer and
assumption, including, without limitation, inspection and investigation fees,
title insurance charges, and Reasonable Attorneys' Fees; (ix) Lender approves
the management agreement and leasing agreement, and the management and leasing
company to be employed by the proposed transferee; and (x) the transferee is
simultaneously purchasing each of the Properties which secure the Affiliate
Loans, to the extent such Affiliate Loans remain outstanding. Any transfer of
all or any portion of the Property which does not strictly comply with the terms
and conditions of the foregoing shall be a default hereunder, and shall entitle
Lender to exercise all rights and remedies provided in this

                                                            Germantown, Maryland

                                       38



Deed of Trust and the other Loan Documents. This one-time right of transfer
shall apply to the Grantor named herein and not to any subsequent owner of the
Property.

         33.      FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the
Note and the Grantor's Guaranty remain unpaid, Grantor shall not, either
voluntarily or involuntarily, permit the Property or any part thereof to become
subject to any secondary or subordinate lien, mortgage, deed of trust, security
interest or encumbrance of any kind whatsoever without the prior written consent
of Lender, and the imposition of any such secondary lien, mortgage, deed of
trust, security interest or encumbrance without the approval of Lender shall
constitute a default hereunder, and entitle Lender, at Lender's sole option, to
declare the outstanding principal balance of the Note, all accrued and unpaid
interest thereon, Prepayment Premiums (to the extent permitted by the laws of
the State, late payment charges and any other amounts secured hereby to be and
become immediately due and payable in full. In the event that Lender shall
hereafter give its written consent to the imposition of any such secondary lien,
mortgage, deed of trust, security interest or other encumbrance upon the
Property, Lender, at Lender's sole option, shall be entitled to accelerate the
maturity of the Note and the Grantor's Guaranty and exercise any and all
remedies provided and available to Lender hereunder and in the other Loan
Documents in the event that the holder of any such secondary lien or encumbrance
shall institute foreclosure or other proceedings to enforce the same; it being
understood and agreed that a default under any instrument or document
evidencing, securing or secured by any such secondary lien or encumbrance shall
be and constitute a default hereunder. In the event all or any portion of the
proceeds of the Loan are used for the purpose of retiring debt or debts secured
by prior liens on the Property, Lender shall be subrogated to the rights and
lien priority of the holder or holders of the lien or liens so discharged.

         34.      CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Grantor agrees that
the making of any oil, gas or mineral lease, or the sale or conveyance of any
mineral interest or right to explore for minerals under, through or upon the
Property, would impair the value of the Property, and that Grantor shall have no
right, power or authority to lease the Property, or any part thereof, for oil,
gas or other mineral purposes, or to grant, assign or convey any mineral
interest of any nature, or the right to explore for oil, gas and other minerals,
without first obtaining Lender's express written permission therefor, which
permission shall not be valid until recorded among the Land Records of the
county in which the Property is located. Grantor further agrees that if Grantor
shall make, execute, or enter into any such lease or attempt to grant any such
mineral rights without such prior written permission of Lender, then Lender
shall have the option, without notice, to declare the same to be a default
hereunder, and to declare the Loan immediately due and payable in full. Whether
or not Lender shall consent to such lease or grant of mineral rights, Lender
shall receive the entire consideration to be paid for any such lease or grant of
mineral rights, with the same to be applied to the Loan notwithstanding the fact
that the amount owing thereon may not then be due and payable or that the Loan
is otherwise adequately secured; provided, however, that the

                                                            Germantown, Maryland

                                       39



acceptance of such consideration shall in no way impair the lien of this Deed of
Trust on the Property or cure any existing Monetary Default.

         35.      ESTOPPEL CERTIFICATION BY GRANTOR. Grantor, upon request of
Lender therefor made either personally or by mail, shall certify in writing to
Lender (or any party designated by Lender), in a form satisfactory to Lender or
such designee, the amount of principal and interest then outstanding under the
terms of the Note and the Grantor's Guaranty and any other sums due and owing
under this Deed of Trust or any of the other Loan Documents, and whether any
offsets or defenses exist against the Loan. Such certification shall be made by
Grantor within ten (10) days if the request is made personally, or within twenty
(20) days if the request is made by mail.

         36.      CROSS-DEFAULT. The Note is also secured by the terms,
conditions and provisions of the Assignment, by three Cross-Default Guaranty
Agreements of even date herewith from Agree - Columbia Crossing Project, L.L.C.,
a Delaware limited liability company, as guarantor for a loan made by Lender to
Agree-Columbia, Omaha, and Oklahoma City, respectively in favor of Lender
(hereinafter individually or collectively referred to as the "AFFILIATED-GRANTOR
CROSS-DEFAULT GUARANTYS") and, additionally, may be secured by contracts or
agreements of guaranty or other security instruments. The terms, covenants,
conditions and agreements of each security instrument shall be considered a part
hereof as fully as if set forth herein verbatim. Any default under this Deed of
Trust, any Affiliated Grantor Cross-Default Guaranty or any of the other Loan
Documents shall constitute a default hereunder and under each of the other Loan
Documents. Notwithstanding the foregoing, the enforcement or attempted
enforcement of this Deed of Trust or any of the other Loan Documents now or
hereafter held by Lender shall not prejudice or in any manner affect the right
of Lender to enforce any other Loan Document; it being understood and agreed
that Lender shall be entitled to enforce this Deed of Trust and any of the other
Loan Documents now or hereafter held by it in such order and manner as Lender,
in its sole discretion, shall determine.

         37.      EXAMINATION OF GRANTOR'S RECORDS. Grantor will maintain
complete and accurate books and records showing in detail the income and
expenses of the Property, and will permit Lender and its agents, contractors or
representatives to examine said books and records and all supporting vouchers
and data during normal business hours and from time to time upon request by
Lender, in such place as such books and records are customarily kept. Grantor
will furnish to Lender, within one hundred twenty (120) days after the close of
each respective fiscal period annual and quarterly financial statements (income
statements and a balance sheet) for the Grantor and the Property. Grantor will
furnish to Lender on or before 45 calendar days after the end of each calendar
quarter the following items, each certified by Grantor as being true and
correct, in such format and in such detail as Lender or its servicer may
request: (a) a written statement (rent roll) dated as of the last day of each
such calendar quarter identifying each of the Occupancy Leases by the term,
space occupied, rental required

                                                            Germantown, Maryland

                                       40



to be paid (including percentage rents and tenant sales), security deposit paid,
any rental concessions, all rent escalations, any rents paid more than one month
in advance, any special provisions or inducements granted to tenants, any taxes,
maintenance and other common charges paid by tenants, all vacancies and
identifying any defaults or payment delinquencies thereunder; and (b) quarterly
and year-to-date operating statements prepared for each calendar quarter during
each such reporting period detailing the total revenues received, total expenses
incurred, total cost of all capital improvements, total debt service and total
cash flow. These statements shall be in form acceptable to Lender and its
servicer, shall be prepared in accordance with generally accepted accounting
principles, and shall include a rent roll, certified as true and correct by
Grantor. The statements shall show in detail all income derived from and
expenses incurred in connection with the ownership of the Property, including
current annual sales figures for all Major Tenants of the Property if required
under the Major Tenant leases or if such financial information is otherwise
available. Grantor shall deliver to Lender, for Grantor, or any entity with whom
Grantor's tax return is consolidated, copies of all income tax returns, requests
for extension and other similar items contemporaneously with its delivery of
same to the Internal Revenue Service. In the event Grantor fails to provide such
statements to Lender within the time prescribed above, Grantor shall pay Lender
the sum of $200.00 in administrative expenses for each successive month for
which the statements are delinquent (or in the case of such statements to be
delivered prior to the transfer of the Loan to Investor (hereafter defined), for
each successive week for which the statements are delinquent). Upon a default
hereunder, Lender shall have the right to require that said financial statements
be audited and certified by a certified public accountant acceptable to Lender,
at the sole cost and expense of Grantor.

         Prior to the transfer of the Loan to Investor by Lender, Grantor shall
deliver to Lender the reports required above on a monthly basis. Such reports
shall be delivered within ten calendar days after the end of each calendar
month.

         In addition, at the request of Lender, but in no case more often than
once a quarter nor more than three (3) times during the term of the Loan, unless
a default has occurred, Grantor shall furnish to Lender (i) unaudited financial
statements (balance sheet, income statement, cash flow statement and current
rent roll) covering operation of the Property for periods other than those set
forth in the preceding paragraph and (ii) unaudited financial statements
(balance sheets, income statements, and cash flow statements) for Grantor, its
general partner(s), shareholder(s) or member(s) (whichever is applicable) and
for such other principals of Grantor as designated by Lender, provided that for
so long as the Property is held by Grantor such statements shall be required
only for Grantor and Agree Realty Corporation. All such statements shall be
certified to Lender to be complete, correct, and accurate by the individual (for
an individual's statements) or by an authorized representative of the entity (if
statements are for a partnership, corporation or limited liability company).

                                                            Germantown, Maryland

                                       41



         Any inspection or audit of the Property or the books and records of
Grantor, or the procuring of documents and financial and other information, by
or on behalf of Lender, shall be at Grantor's expense and shall be for Lender's
protection only, and shall not constitute any assumption of responsibility or
liability by Lender to Grantor or anyone else with regard to the condition,
construction, maintenance or operation of the Property, nor Lender's approval of
any certification given to Lender nor relieve Grantor of any of Grantor's
obligations.

         38.      ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED.
Grantor covenants and agrees to permit or suffer none of the following without
the prior written consent of Lender:

                  (a)      Any structural alteration of, or addition to, the
Improvements now or hereafter situated upon the Real Property, or the addition
of any new buildings or other structure(s) thereto, other than the erection or
removal of non-load bearing interior walls or as may be permitted under the
Borders Lease, so long as the Borders Lease remains in effect; or

                  (b)      The removal, transfer, sale or lease of the Property,
except that the removal, replacement or substitution of fixtures, equipment,
machinery, apparatus and articles of personal property (replacement or
substituted items must be of like or better quality than the removed items in
their original condition) encumbered hereby may be made in the normal course of
business; or

                  (c)      The use of any of the Improvements now or hereafter
situated on the Real Property for any purpose other than the Existing Use and
related facilities, or as may be permitted under the Borders Lease, so long as
the Borders Lease remains in effect.

         39.      FUTURE ADVANCES SECURED. This Deed of Trust shall secure not
only existing indebtedness, but also future advances, whether such advances are
obligatory or to be made at the option of Lender. Upon the request of Grantor,
and at Lender's option prior to release of this Deed of Trust, Lender may make
future advances to Grantor. All future advances with interest thereon shall be
secured by this Deed of Trust to the same extent as if such future advances were
made on the date of the execution of this Deed of Trust unless the parties shall
agree otherwise in writing, but the total secured indebtedness shall not exceed
at any one time a maximum principal amount equal to double the face amount of
the Note plus interest and costs of collection, including court costs and
Reasonable Attorneys' Fees. Any advances or disbursements made for the benefit
or protection of or the payment of taxes, assessments, levies or insurance upon
the Property, with interest on such disbursements as provided herein, shall be
added to the principal balance of the Note and collected as a part thereof. To
the extent that Grantor's Guaranty secured by this Deed of Trust may secure more
than one note, a default in the payment of any such mortgage note shall
constitute a default in the payment of all such Note.

                                                            Germantown, Maryland

                                       42



         40.      EFFECT OF SECURITY AGREEMENT. Grantor agrees to, and shall
upon the request of Lender, execute and deliver to Lender, in form and content
satisfactory to Lender, such financing statements, descriptions of property and
such further assurances as Lender, in Lender's sole discretion, may from time to
time consider necessary to create, perfect, continue and preserve the lien and
encumbrances hereof, and the security interest granted herein, upon and in the
Property. Without the prior written consent of Lender, Grantor shall not create
or suffer to be created, pursuant to the UCC, any other security interest in
such real and personal property and fixtures described herein. Upon the
occurrence of a default hereunder or Grantor's breach of any other covenants or
agreements between the parties entered into in conjunction herewith, Lender
shall have the remedies of a secured party under the UCC as provided in Section
25, and at Lender's option, the remedies provided for in this Deed of Trust and
the other Loan Documents. Lender, at the expense of Grantor, may cause such
statements, descriptions and assurances, as herein provided in this Section 40,
and this Deed of Trust, to be recorded and re-recorded, filed and refiled, at
such times and in such places as may be required or permitted by law to so
create, perfect and preserve the lien and encumbrance hereof upon all of the
Property.

         41.      TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions
of the Application for Deed of Trust Loan dated August 28, 2003, and any
subsequent amendments thereto (the "APPLICATION"), executed by and between
Grantor and Lender, are incorporated herein by reference. All terms, covenants,
conditions and agreements of the Application not expressly set forth in this
Deed of Trust and any of the other Loan Documents shall survive the execution
and delivery hereof, and remain in full force and effect. In the event any
conflict exists between the terms, covenants, conditions and agreements of the
Application and the Loan Documents, the terms, covenants, conditions and
agreements of the Loan Documents shall prevail.

         42.      SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof
shall be binding upon Grantor and the heirs, personal representatives, trustees,
successors and assigns of Grantor, and shall inure to the benefit of Lender, its
successors and assigns. Where more than one Grantor is named herein, the
obligations and liabilities of said Grantor shall be joint and several.

         Wherever used in this Deed of Trust, unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein:
(a) the word "Grantor" shall mean Grantor and/or any subsequent owner or owners
of the Property; (b) the word "Lender" shall mean Lender or any subsequent
holder or holders of this Deed of Trust; (c) the word "Note" shall mean the
Note(s) secured by this Deed of Trust; and (d) the word "person" shall mean an
individual, trustee, trust, corporation, partnership, limited liability
corporation, limited liability partnership, joint venture or unincorporated
association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean
fees charged by attorneys selected by Lender based upon such attorneys' then
prevailing hourly rates as opposed to any statutory presumption

                                                            Germantown, Maryland

                                       43



specified by any statute then in effect in the State. As used herein words of
any gender shall include all other genders.

         43.      NOTICES. All notices, reports, requests or other written
instruments required or permitted hereunder, shall be in writing, signed by the
party giving or making the same, and shall be sent hand-delivered, effective
upon receipt, sent by United States Express Mail or by a nationally recognized
overnight courier, effective upon receipt, or sent by United States registered
or certified mail, postage prepaid, with return receipt requested, deemed
effective on the earlier of the day of actual delivery as shown by the
addressee's return receipt or the expiration of three business days after the
date of mailing, addressed to the party intended to receive the same at the
address set forth below or at such other address as shall be given in writing by
any party to another ("WRITTEN NOTICE"):

         If to Grantor:            AGREE - MILESTONE CENTER PROJECT, L.L.C.
                                   31850 Northwestern Highway
                                   Farmington Hills, Michigan 48334
                                   Attention:  Mr. Richard Agree

         If to Lender:             NATIONWIDE LIFE INSURANCE COMPANY
                                   One Nationwide Plaza
                                   Columbus, Ohio  43215-2220
                                   Attention: Real Estate Investment Department,
                                              34T

         44.      GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. GRANTOR AND
LENDER, EACH TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION,
AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR
ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION,
EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE
LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM
WHICH ANY PARTY MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS
BE LIABLE FOR ANY SPECIAL, INCIDENTAL,

                                                            Germantown, Maryland

                                       44



CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS
OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, GRANTOR WAIVES
ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Deed of Trust and the rights
and obligations of the parties hereunder shall be governed by, and construed in
accordance with, the internal laws of the State, without regard to principles of
conflicts of laws. The parties hereto irrevocably (a) agree that any suit,
action or other legal proceeding arising out of or relating to this Deed of
Trust may be brought in a court of record in the State or in the courts of the
United States of America located in such State, (b) consent to the non-exclusive
jurisdiction of each such court in any suit, action or proceeding, and (c) waive
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. If any clauses or
provisions herein contained operate, or would prospectively operate, to
invalidate this Deed of Trust, then such clauses or provisions only shall be
held for naught, as though not herein contained, and the remainder of this Deed
of Trust shall remain operative and in full force and effect.

         45.      RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising
under the terms, covenants, conditions and agreements contained in this Deed of
Trust shall be separate, distinct and cumulative, and none of them shall be in
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provisions,
anything herein or otherwise to the contrary notwithstanding. If Grantor is
comprised of more than one person or entity, then the liability of each such
person and entity hereunder shall be joint and several.

         46.      MODIFICATIONS. This Deed of Trust cannot be changed, altered,
amended or modified except by an agreement in writing and in recordable form,
executed by both Grantor and Lender.

         47.      EXCULPATION. Notwithstanding anything contained herein to the
contrary, the liability of Grantor is subject to the limited recourse provisions
contained in the Exculpation section of the Note, which are incorporated herein
and made a part hereof by reference as if fully set forth herein.

         48.      FULL RECOURSE. Notwithstanding any provisions in this Deed of
Trust to the contrary, including without limitation the provisions set forth in
the section captioned "Exculpation" hereinabove, Grantor shall be personally
liable, jointly and severally, for the entire Loan secured by this Deed of Trust
(including all principal, interest and other charges) in the event (a) Grantor
violates the covenant governing the placing of subordinate financing on the
Property as set forth in this Deed of Trust; (b) Grantor violates the covenant
restricting transfers of interests in the Property or transfers of ownership
interests in Grantor as set forth in this Deed of Trust; or (c) Grantor or any
guarantor violates the provisions of Section 22 of this Deed of Trust, or there
is filed against Grantor or any guarantor or indemnitor of the

                                                            Germantown, Maryland

                                       45



Loan, a petition in bankruptcy or for the appointment of a receiver, or there
commences under any bankruptcy or insolvency law, proceedings for Grantor's
relief, or for the compromise, extension, arrangement or adjustment of Grantor's
obligations which is not dismissed within thirty (30) days after the filing of
same.

         49.      LENDER IS NOT A JOINT VENTURER OR PARTNER. Grantor and Lender
acknowledge and agree that in no event shall Lender be deemed to be a partner or
joint venturer with Grantor or any member of Grantor. Without limitation of the
foregoing, Lender shall not be deemed to be a partner or joint venturer on
account of its becoming a mortgagee in possession or exercising any rights
pursuant to this Deed of Trust or pursuant to any other instrument or document
evidencing or securing any of the indebtedness secured hereby, or otherwise.

         50.      CAPTIONS. The captions set forth at the beginning of the
various Sections of this Deed of Trust are for convenience only, and shall not
be used to interpret or construe the provisions of this Deed of Trust.

         51.      TRUSTEES. Trustees hereby accept the trust created by this
Deed of Trust, upon the terms and subject to the conditions set forth herein,
including the following:

         Trustees assume no responsibility for and make no representations as to
(i) the description, identification or value of the Property or any part
thereof, (ii) the validity or sufficiency of the Loan Documents, (iii)
Borrower's or Grantor's present or future financial condition, or (iv) the
validity or collectibility of the Note or the Grantor's Guaranty.

         Trustees (i) may exercise their powers and perform their duties
hereunder either directly or by or through such attorneys, agents, servants as
they shall appoint, and (ii) shall not be answerable or liable (x) for the acts,
negligence or default of any such attorney, agent or servant which Trustees may
so appoint so long as the same are selected with care, or (y) for any act or
omission of Lender, or (z) for any other cause arising under this Deed of Trust
or otherwise, except for each such Trustee's own individual willful misconduct.

         Trustees, in their discretion may consult with legal counsel selected
and employed by Trustees, and Trustees shall incur no liability to Grantor,
Lender or to any other person by reason of any action taken, suffered or omitted
by Trustees in accordance with the opinion of such counsel.

         Trustees shall be under no obligation to sell the Property or any part
thereof upon a default hereunder, or to exercise any of the rights or powers
vested in Trustees by this Deed of Trust, except upon the written request or
direction of Lender and upon Lender furnishing security or an indemnity
satisfactory to Trustees against costs, expenses and liabilities incurred

                                                            Germantown, Maryland

                                       46



or which may be incurred by Trustees in selling the Property or in complying
with such request or direction.

         At any time that more than one person is acting as Trustee hereunder,
the powers vested in Trustees may be exercised by either Trustee acting
individually in the event of the unavailability of the other Trustee. Any person
acting as Trustee hereunder may resign as Trustee upon written notice to the
Lender.

         Lender may remove Trustees at any time or from time to time for any
reason (with or without cause) and appoint a successor trustee or trustees, and
upon such appointment, all powers, rights, duties and authority of Trustees, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall be appointed by written instrument duly recorded in the county or
counties where the Property covered hereby is located, which appointment may be
executed by any authorized agent of Lender or in any other manner permitted by
applicable law.

         52.      SPLITTING OF DEED OF TRUST. This Deed of Trust and the Note
and the Grantor's Guaranty, shall, at any time until the same shall be fully
paid and satisfied, at the sole election of Lender, be split or divided into two
or more notes and two or more security instruments, each of which shall cover
all or a portion of the Property to be more particularly described therein. To
that end, Grantor, upon written request of Lender, shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered by the then
owner of the Property, to Lender and/or its designee or designees substitute
notes and security instruments in such principal amounts, aggregating not more
than the then unpaid principal amount of Loan, and containing terms, provisions
and clauses similar to those contained herein and in the Note and the Grantor's
Guaranty, and such other documents and instruments as may be required by Lender.

         53.      REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note,
the Grantor's Guaranty or any other Loan Document which is not of public record,
and, in the case of any such mutilation, upon surrender and cancellation of such
Note, the Grantor's Guaranty, or other Loan Document, Grantor, at its expense,
will issue or cause to be issued, in lieu thereof, a replacement Note, the
Grantor's Guaranty, or other Loan Document, dated the date of such lost, stolen,
destroyed or mutilated Note, Grantor's Guaranty, or other Loan Document in the
same principal amount thereof and otherwise of like tenor.

         54.      SOLE DISCRETION OF LENDER. Wherever pursuant to this Deed of
Trust Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide that arrangements or terms are satisfactory
or not satisfactory shall be in the sole discretion of

                                                            Germantown, Maryland

                                       47



Lender and shall be final and conclusive, except as may be otherwise expressly
and specifically provided herein.

         55.      TRANSFER OF LOAN.

                  (a)      Lender may, at any time, sell, transfer or assign the
Note, the Grantor's Guaranty, this Deed of Trust, the Assignment and the other
Loan Documents, and any or all servicing rights with respect thereto, or grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "SECURITIES"), or otherwise sell the Loan or
an interest therein (a "SECONDARY MARKET TRANSACTION"). Lender may forward to
each purchaser, transferee, assignee, servicer, participant, investor in such
Securities or in connection with a Secondary Market Transaction or any Rating
Agency rating such Securities (collectively, the "INVESTOR") and each
prospective Investor, all documents and information which Lender now has or may
hereafter acquire relating to the Loan and to Borrower, Grantor, any Guarantor
and the Property, whether furnished by Borrower, Grantor, any Guarantor or
otherwise, as Lender determines necessary or desirable. Grantor acknowledges
that certain information regarding the Loan and the parties thereto and the
Property may be included in a private placement memorandum, prospectus or other
disclosure documents. The term "RATING AGENCY" shall mean each statistical
rating agency that has assigned a rating to the Securities.

                  (b)      Grantor shall cooperate in good faith with Lender in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements reasonably imposed by the participants
involved in any Secondary Market Transaction (including without limitation, a
Rating Agency and/or an Investor) including, without limitation, all structural
or other changes to the Loan, modifications to any documents evidencing or
securing the Loan, delivery of opinions of counsel acceptable to the Rating
Agency or such Investors and addressing such matters as the Rating Agency or
such Investors may require; provided, however, that the Grantor shall not be
required to modify any documents evidencing or securing the Loan which would
modify (i) the interest rate payable under the Note, (ii) the stated maturity of
the Note, (iii) the amortization of principal of the Note, or (iv) any other
material terms or covenants of the Loan.

                  (c)      If Securities are issued in connection with the Loan
or a Secondary Market Transaction occurs with respect to the Loan, all Funds
held by Lender in escrow or pursuant to reserves in accordance with the Loan
Documents shall be deposited in "eligible accounts" at "eligible institutions"
and invested in "permitted investments" as then defined and required by any
Rating Agency.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                                            Germantown, Maryland

                                       48



         IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be
executed as of the day and year first above written.

                                            GRANTOR:

                                            AGREE - MILESTONE CENTER
                                            PROJECT, L.L.C.,
                                            a Delaware limited liability company

                                            By:  AGREE LIMITED PARTNERSHIP,
                                                 a Delaware limited partnership
                                                 Its Member

                                                 By: AGREE REALTY CORPORATION,
                                                     a Maryland corporation
                                                     Its General Partner

                                                     By: /s/ Richard Agree
                                                         ------------------
                                                           Richard Agree
                                                           President

STATE OF                                    )
                                            )
COUNTY OF                                   )


         The foregoing instrument was acknowledged before me this _____ day of
October, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a
Maryland corporation, on behalf of the corporation as general partner of Agree
Limited Partnership, a Delaware partnership, as member of Agree - Milestone
Center Project, L.L.C., a Delaware limited liability company.

                                                  ------------------------------

                                            Name:
                                                  ------------------------------
                                            Notary Public
                                            My Commission Expires:
                                                                  --------------
                                            (SEAL)

                                                            Germantown, Maryland

                                      S-1



The undersigned, an attorney admitted to practice before the Court of Appeals of
Maryland, hereby certifies that the within instrument was prepared by me or
under my supervision.

- -----------------------------

Attorney's Name:
                ------------------

                                                            Germantown, Maryland

                                      S-2



                                    EXHIBIT A

                               (Legal Description)

SITUATED IN THE CITY OF GERMANTOWN, COUNTY OF MONTGOMERY, STATE OF MARYLAND:

Lot numbered Twenty-nine (29) in Block lettered "C" as shown on a plat of
subdivision entitled "Plat of Resubdivision, Lots 27-29 and Outlots A & B, Block
C, Milestone Center", and recorded among the land records of Montgomery County,
Maryland in Plat Book 185, at Plat No. 20444. Together with ingress/egress
easements set forth in Liber 13760, folio 483 and Liber 13760, Folio 569
aforesaid land records.

                                                            Germantown, Maryland

                                      A-1



                                    EXHIBIT B

                        LOCAL REQUIREMENTS FOR RECORDING

1. Parcel identifier assigned to the Property by the Clerk of the Circuit Court
   for Montgomery County:
                         --------------------------------.

2. County tax account number for the Property:
                                               -----------------------.

3. Record legal description of the boundaries of the Property:

4. Street address of the Property:
                                   -----------------------------------.

5. Full name and address of each party to the instrument and the nature of the
   party's interest:

6. Name of title insurer insuring the instrument:
                                                 ---------------------.

                                                            Germantown, Maryland

                                      A-2

EX-10.35

Recorded at the Request of and                                     EXHIBIT 10.35
When Recorded Return to:

Pepe & Hazard LLP
225 Asylum Street - 22nd Floor
Hartford, CT  06103-4302
Attention:  Adam F. Zweifler, Esq.

                         MORTGAGE AND SECURITY AGREEMENT

         This MORTGAGE AND SECURITY AGREEMENT (the "MORTGAGE") is dated as of
the 31st day of October, 2003, by OKLAHOMA CITY STORE NO. 151 L.L.C., a Delaware
limited liability company ("BORROWER"), having its principal office at 31850
Northwestern Highway, Farmington Hills, Michigan 48334 to and in favor of
NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, its successors and
assigns ("LENDER"), having its principal office at One Nationwide Plaza,
Columbus, Ohio 43215-2220, Attention: Real Estate Investment Department, 34T, or
at such other place as Lender may from time to time designate.

                              W I T N E S S E T H:

                  WHEREAS, Lender has made four loans of even date herewith in
the aggregate total original principal amount of Fifteen Million Dollars
($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the
following loans of even date herewith: a loan from Lender to Borrower in the
original principal amount of $4,260,000.00 (this "LOAN"); a loan to ACMP
Germantown LLC, a Delaware limited liability company ("AGREE-MILESTONE"), in the
original principal amount of $3,310,000.00 (the "AGREE-MILESTONE LOAN"); a loan
to ACCP Maryland LLC, a Delaware limited liability company ("AGREE-COLUMBIA") in
the original principal amount of $3,520,000.00 (the "AGREE-COLUMBIA LOAN"); and
a loan to Omaha Store No. 166 L.L.C., a Delaware limited liability company
("OMAHA"), in the original principal amount of $3,910,000.00 (the "OMAHA LOAN")
Agree-Milestone, Agree-Columbia and Omaha are hereinafter referred to
collectively as the "AFFILIATED BORROWERS". The Agree-Milestone Loan, the
Agree-Columbia Loan and the Omaha Loan are hereinafter referred to generically
as an "AFFILIATE LOAN" and collectively as the "AFFILIATE LOANS";

                                                         Oklahoma City, Oklahoma



         WHEREAS, Borrower is justly indebted to Lender in the original
principal sum of Four Million Two Hundred Sixty Thousand and 00/100 Dollars
($4,260,000.00) with interest thereon, which Loan is evidenced and represented
by that certain Note of even date herewith (the "NOTE"), both principal and
interest being payable as therein provided, with the first payment on the Note
becoming due and payable on the date of disbursement and the term "Note" shall
include all other notes given in substitution, modification, increase, renewal
or extension of the original Note described herein, in whole or in part;

         WHEREAS Borrower has guaranteed the payment and performance of the
obligations of the Affiliated Borrowers with respect to the Affiliate Loans
pursuant to the terms of that certain Cross-Default Guaranty Agreement of even
date herewith from Borrower, as guarantor, to Lender (the "BORROWER
CROSS-DEFAULT GUARANTY"); and

         WHEREAS, Lender, as a condition precedent to the extension of credit
and the making of the Loan has required that Borrower provide Lender with
security for the repayment of the Loan as well as for the performance,
observance and discharge by Borrower of various terms, covenants, conditions and
agreements made by Borrower to, with, in favor of and for the benefit of Lender
with respect to the Loan and such security;

         NOW THEREFORE, in consideration of and in order to secure the repayment
of the Loan evidenced and represented by the Note, together with interest on the
Loan, as well as the payment of all other sums of money secured hereby, as
hereinafter provided; to secure the observance, performance and discharge by
Borrower of all terms, covenants, conditions and agreements set forth in the
Note, this Mortgage and in the other Loan Documents (hereafter defined); in
order to charge the properties, interests and rights hereinafter described with
such payment, observance, performance and discharge; and in consideration of the
sum of one dollar paid by Lender to Borrower, and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged by
Borrower, Borrower does hereby grant, bargain, sell, convey, assign, transfer,
pledge, deliver, hypothecate, warrant and confirm unto Lender forever, all of
Borrower's right, title and interest in and to the following described
properties, including all rights, interests, replacements, substitutions and
additions thereto, therein or therefore (collectively, the "MORTGAGED
PROPERTY"):

         (i)      All that certain piece, parcel or tract of land or real
property of which Borrower is now seized and in actual or constructive
possession, situated in the City of Omaha, County of Douglas, and State of
Nebraska (the "STATE"), and being more particularly described on EXHIBIT A
attached hereto and by this reference made a part hereof (the "REAL PROPERTY");

         (ii)     All buildings, structures and other improvements of any kind,
nature or description now or hereafter erected, constructed, placed or located
upon the Real Property (the "IMPROVEMENTS"), including, without limitation, any
and all additions to, substitutions for or replacements of such Improvements;

                                                         Oklahoma City, Oklahoma

                                       2


         (iii)    All minerals, royalties, gas rights, water, water rights,
water stock, flowers, shrubs, lawn plants, crops, trees, timber and other
emblements now or hereafter located on, under or above all or any part of the
Real Property;

         (iv)     All and singular, the tenements, hereditaments, strips and
gores, rights-of-way, easements, privileges, profits and other appurtenances now
or hereafter belonging or in any way appertaining to the Real Property,
including, without limitation, all right, title and interest of the Borrower in
any after-acquired right, title, interest, remainder or reversion in and to the
beds of any ways, streets, avenues, roads, alleys, passages and public places,
open or proposed, in front of, running through, adjoining or adjacent to the
Real Property (the "APPURTENANCES");

         (v)      Any and all leases, licenses, contracts, rents, license fees,
royalties, issues, revenues, profits, proceeds, deposits, income and other
benefits, including accounts receivable, termination fees, of, accruing to or
derived from the Real Property, Improvements and Appurtenances, and any business
or enterprise presently situated or hereafter operated thereon and therewith and
all of Borrower's right, title and interest under any and all lease guaranties,
letters of credit, and any other credit support furnished to Borrower in
connection with any of the foregoing (the "RENTS");

         (vi)     Any and all awards, payments or settlements, including
interest thereon, and the right to receive the same, as a result of: (a) the
exercise of the right of eminent domain; (b) the alteration of the grade of any
way, street, avenue, road, alley, passage or public place; (c) any other injury,
damage, casualty or claim relating to the taking of, or decrease in the value
of, the Real Property, Improvements or Appurtenances; or (d) proceeds of
insurance awards, to the extent of all amounts which may be secured by this
Mortgage at the date of any such award or payment including but not limited to
Reasonable Attorneys' Fees (as hereinafter defined), costs and disbursements
incurred by Lender in connection with the collection of such award or payment;

         (vii)    All fixtures, materials, equipment, machinery, apparatus,
appliances, and other property whatsoever now or hereafter attached to,
installed in, or used in connection with the buildings and other improvements
now erected or hereafter to be erected on said land, including, but not limited
to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators,
air-conditioning and sprinkler systems, gas and electric fixtures, carpets,
rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all
other furnishings, tools, equipment and machinery, appliances, building
supplies, materials, and all fixtures, accessions and appurtenances thereto, and
all renewals or replacements of or substitutions for any of the foregoing, all
of which property and things are hereby declared to be permanent fixtures and
accessions to the freehold and part of the realty conveyed herein as security
for the indebtedness herein mentioned; and

                                                         Oklahoma City, Oklahoma

                                       3


         (viii)   All agreements or contracts relating to any interest rate cap
agreements, swaps or other interest hedging agreements;

         TO HAVE AND TO HOLD the foregoing Mortgaged Property and the rights
hereby granted for its use and benefit unto Lender and its successors and
assigns in fee simple forever. In order to secure the repayment of the Loan
evidenced and represented by the Note, together with interest on the Loan, as
well as the payment of all other sums of money secured hereby including, without
limitation, the obligations of Borrower under the Borrower Cross-Default
Guaranty, as hereinafter provided; and to secure the observance, performance and
discharge by Borrower of all covenants, conditions and agreements set forth in
the Note, this Mortgage, the Borrower Cross-Default Guaranty and in the other
Loan Documents; and in order to charge the properties, interests and rights
hereinafter described with such payment, observance, performance and discharge;
and in consideration of the sum of Ten Dollars ($10.00) paid by Lender and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, Borrower hereby grants Lender a security interest in all
Fixtures, Goods (including, without limitation, Consumer Goods, Inventory,
Equipment and Farm Products), Accounts, Chattel Paper (including, without
limitation, Electronic Chattel Paper and Tangible Chattel Paper), Instruments,
General Intangibles (including, without limitation, Payment Intangibles and
Software), Letters of Credit, Letter-of-Credit Rights, Documents, As-Extracted
Collateral, Money and Deposit Accounts of every kind, and all proceeds thereof,
including, without limitation, any and all licenses, permits, franchises,
trademarks, trade names, service marks or logos, plans, specifications, maps,
construction contracts, instruments, insurance policies, fittings and fixtures
of every kind, which is, are or shall hereafter be located upon, attached,
affixed to or used or useful, either directly or indirectly, in connection with
the complete and comfortable use, occupancy and operation of the Real Property,
Improvements or Appurtenances as a retail project (the "EXISTING USE"), or any
other business, enterprise or operation as may hereafter be conducted upon or
with said Real Property, Improvements or Appurtenances, including, without
limitation, any and all licenses, permits or franchises, used or required in
connection with such use, occupancy or operation as well as the proceeds thereof
or therefrom regardless of form, all security deposits and advance rentals under
lease agreements now or at any time hereafter covering or affecting any of the
Property and held by or for the benefit of Borrower, all monetary deposits which
Borrower has been required to give to any public or private utility with respect
to utility services furnished to the Real Property or Improvements, all rents,
issues and profits from leases of all or any part of the Real Property or
Improvements, all proceeds (including premium refunds) of each policy of
insurance relating to the Real Property or Improvements, all proceeds from the
taking of the Real Property or Improvements or any part thereof or any interest
therein or right or estate appurtenant thereto by eminent domain or by purchase
in lieu thereof, all amounts deposited in escrow for the payment of ad valorem
taxes, assessments, charges, ground rentals and/or premiums for policies of
insurance with respect to the Real Property or

                                                         Oklahoma City, Oklahoma

                                       4


Improvements, all proceeds and other amounts paid or owing to Borrower under or
pursuant to any and all contracts and bonds relating to the construction,
erection or renovation of the Real Property or Improvements, all oil, gas and
other hydrocarbons and other minerals produced from or allocated to the Real
Property and all products processed or obtained therefrom, the proceeds thereof,
and all accounts and general intangibles under which such proceeds may arise,
together with any sums of money that may now or at any time hereafter become due
and payable to Borrower by virtue of any and all royalties, overriding
royalties, bonuses, delay rentals and any other amount of any kind or character
arising under any and all present and future oil, gas and mining leases covering
the Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL
PROPERTY," which term expressly excludes any toxic waste or substance deemed
hazardous under federal, regional, state or local laws, codes, ordinances,
statutes, rules, regulations, decisions or orders). The Mortgaged Property and
the Fixtures and Personal Property are herein together referred to as the
"PROPERTY".

         Except as otherwise expressly provided in this Mortgage, all terms in
this Mortgage relating to the Property and the grant of the foregoing security
interest which are defined in the Uniform Commercial Code of the State (the
"UCC") shall have the meanings assigned to them in Article 9 (or, absent
definition in Article 9, in any other Article) of the UCC, as those meanings may
be amended, revised or replaced from time to time. Notwithstanding the
foregoing, the parties intend that the terms used herein which are defined in
the UCC have, at all times, the broadest and most inclusive meanings possible.
Accordingly, if the UCC shall in the future be amended or held by a court to
define any term used herein more broadly or inclusively than the UCC in effect
on the date of this Mortgage, then such term, as used herein, shall be given
such broadened meaning. If the UCC shall in the future be amended or held by a
court to define any term used herein more narrowly, or less inclusively, than
the UCC in effect on the date of this Mortgage, such amendment or holding shall
be disregarded in defining terms used in this Mortgage.

         Borrower hereby covenants and warrants with and to Lender that Borrower
is indefeasibly seized of the Property and has good right, full power, and
lawful authority to convey and encumber all of the same as aforesaid; that
Borrower hereby fully warrants the title to the Property and will defend the
same and the validity and priority of the lien and encumbrance of this Mortgage
against the lawful claims of all persons whomsoever; and Borrower further
warrants that the Property is free and clear of all liens and encumbrances of
any kind, nature or description, save and except only (with respect to said Real
Property, Improvements and Appurtenances) for real property taxes for years
subsequent to 2003 (which are not yet due and payable) and those exceptions
accepted by Lender as set forth in the title insurance commitment or proforma
policy issued to Lender precedent to the issuance of a Lender's Policy of Title
Insurance insuring the first lien priority of this Mortgage (the "PERMITTED
EXCEPTIONS").

         If Borrower shall pay to Lender the Loan evidenced by the Note, and if
Borrower shall duly, promptly and fully perform, discharge, execute, effect,
complete and comply with and abide by each and every one of the terms,
covenants, conditions and agreements of the Note,

                                                         Oklahoma City, Oklahoma

                                       5


this Mortgage, the Borrower Cross-Default Guaranty and all other Loan Documents,
then this Mortgage and the estates and interests hereby granted and created
shall cease, terminate and be null and void, and shall be discharged of record
at the expense of Borrower.

         Borrower, for the benefit of Lender and its successors and assigns,
does hereby expressly covenant and agree as follows:

         1.       PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall pay the
principal of the Loan evidenced by the Note, together with all interest thereon,
in accordance with the terms, covenants and conditions of the Note, and perform
all obligations of Borrower under the Borrower Cross-Default Guaranty promptly
at the times, at the place and in the manner that said principal and interest
shall become due, and shall promptly and punctually pay all other sums required
to be paid by Borrower pursuant to the terms, covenants and conditions of the
Note, this Mortgage, the Borrower Cross-Default Guaranty, the Assignment of
Leases, Rents and Profits of even date herewith (the "ASSIGNMENT") and all other
documents and instruments executed as further evidence of, as additional
security for or executed in connection with the Loan evidenced by the Note
(collectively, the "LOAN DOCUMENTS").

         2.       PERFORMANCE OF OTHER OBLIGATIONS. Borrower shall perform,
comply with and abide by each and every one of the terms, covenants, conditions
and agreements contained and set forth in the Note, this Mortgage, and the other
Loan Documents, shall comply with all Laws (hereafter defined) and shall perform
all of its obligations under any term, covenant, condition, restriction or
agreement of record affecting the Property, and to insure that at all times the
Property constitutes one or more legal lots capable of being conveyed without
violation of any subdivision or platting laws, codes, ordinances, statutes,
rules, regulations, or other laws relating to the division, separation or
subdivision of real property.

         3.       PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY;
HAZARDOUS WASTE.

                  (a)      Borrower shall keep all Improvements now existing or
hereafter erected on the Real Property in good order and repair, only to be used
for the Existing Use, and not to do or permit any waste, impairment or
deterioration thereof or thereon, nor to alter, remove or demolish any of the
Improvements or any Fixtures and Personal Property attached or appertaining
thereto, without the prior written consent of Lender, nor to initiate, join in
or consent to any change in any private restrictive covenant, zoning ordinance
or other public or private restrictions limiting or defining the uses which may
be made of the Property or any part thereof, nor to do or permit any other act
whereby the Property shall become less valuable, be used for purposes contrary
to applicable Law or be used in any manner which will increase the premium for
or result in a termination or cancellation of the insurance policies hereinafter
required to be kept and maintained on the Property. In furtherance of, and not
by

                                                         Oklahoma City, Oklahoma

                                       6


way of limitation upon, the foregoing covenant, Borrower shall effect such
repairs as Lender may reasonably require, and from time to time make all needful
and proper replacements so that the Improvements, Appurtenances, Fixtures and
Personal Property will, at all times, be in good condition, fit and proper for
the respective purposes for which they were originally erected or installed. In
connection with the making of such repairs, Borrower shall use contractors who
are properly licensed, who carry workers' compensation insurance and appropriate
liability insurance, who generally have a good reputation for completing their
work in a neat, prompt and workmanlike manner, and use only new or
re-manufactured goods of a quality as good or better than that originally used
on the Property. As provided herein, Borrower shall insure that no liens are
filed against the Property that relate in any way to the repair work provided
for herein. For so long as that certain Lease of the Property (the "BORDERS
LEASE") dated November 14, 2002 between Borrower, as landlord, and Border's,
Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with
Borders as the tenant thereunder and Borrower is diligently enforcing the
obligations of Borders thereunder, Borrower shall be deemed to be in compliance
with the requirements of this subparagraph.

         Borrower at all times shall keep the Property and ground water of the
Property free of Hazardous Materials (as hereinafter defined) to the extent
required by applicable governmental agencies and free of any liens arising in
connection therewith. Borrower shall not and shall not knowingly permit its
tenants or any third party requiring the consent of Borrower to enter the
Property, to use, generate, manufacture, treat, store, release, threaten
release, transport on or over, emit or dispose of Hazardous Materials in, on,
over, under or about the Property including the ground water of the Property in
violation of any federal, regional, state or local law, code, ordinance,
statute, rule, regulation, decision or order currently in existence or hereafter
enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Borrower shall give
Lender prompt Written Notice (as hereinafter defined) of any claim by any
person, entity, or governmental agency that a significant release or disposal of
Hazardous Materials has occurred in, on, over, under or about the Property,
including the ground water of the Property, in excess of those permitted by the
Hazardous Waste Laws, whether caused by the Borrower, any tenant or any third
party. Borrower, through its professional engineers and at Borrower's sole cost,
shall promptly and thoroughly investigate any suspected release of Hazardous
Materials in, on, over, under or about the Property, including the ground water
of the Property. Borrower shall forthwith remove, repair, remediate, clean up,
and/or detoxify any Hazardous Materials found in, on, over, under or about the
Property or in the ground water of the Property to the extent such actions are
required by any applicable Hazardous Waste Laws, and whether or not Borrower was
responsible for the existence of the Hazardous Materials in, on, over, under or
about the Property or the ground water of the Property. "HAZARDOUS MATERIALS"
shall include, but not be limited to, substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" under any Hazardous
Waste Laws.

                  (b)      In addition, Borrower shall not incorporate any
underground storage tanks into the Real Property without the prior written
consent of Lender, and shall insure that

                                                         Oklahoma City, Oklahoma

                                       7


all tanks currently on the Real Property comply with current Hazardous Waste
Laws and underground storage tank regulations and are properly registered.

         Borrower hereby agrees to indemnify and defend Lender and hold Lender
harmless from and against any and all losses, liabilities, damages, injuries,
costs, expenses, fines, fees, suits, actions, debts, obligations, and claims of
any and every kind whatsoever, including Reasonable Attorneys' Fees
(collectively, "LOSSES") paid, incurred or suffered by, or asserted against,
Lender for, with respect to, or as a direct or indirect result of, the presence
in, on, over, under or about, or the escape, seepage, leakage, spillage,
discharge, emission or release from, the Property of any Hazardous Materials
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Hazardous Waste Laws),
regardless of the source of origination and whether or not caused by, or within
the control of, Borrower and including any claims of Lender's negligence or
strict liability, but excluding Lender's willful misconduct or gross negligence.

         Liability under this Section 3(b) and similar provisions in this
Mortgage and the other Loan Documents concerning Hazardous Materials shall
survive repayment of the Note and satisfaction of this Mortgage; provided,
however, Borrower shall have no liability under this Section 3(b) regarding
Hazardous Materials if either (i) the Property becomes contaminated subsequent
to Lender's acquisition of the Property by foreclosure, acceptance by Lender of
a deed in lieu thereof, or subsequent to any transfer of ownership of the
Property which was approved or authorized by Lender in writing, pursuant to this
Mortgage, provided that such transferee assumes in writing all of the
obligations of Borrower with respect to Hazardous Materials pursuant to the Loan
Documents, or (ii) at such time Borrower provides Lender with an environmental
assessment report acceptable to Lender, in Lender's sole discretion, showing the
Property to be free of Hazardous Materials and not in violation of any Hazardous
Waste Laws. The burden of proof under this Section 3(b) with regard to
establishing the date upon which any Hazardous Materials was released in, on,
over, under or about the Property shall be upon Borrower.

                  (c)      Borrower at all times shall maintain the Property in
full compliance with all federal, state, county, regional or local laws, codes,
ordinances, rules, regulations, decisions and orders currently in existence or
hereafter enacted or rendered, governing accessibility for the disabled,
including but not limited to: The Architectural Barriers Act of 1968; The
Rehabilitation Act of 1973; The Fair Housing Act of 1988; and The Americans with
Disabilities Act (collectively, the "ACCESSIBILITY LAWS").

         Borrower hereby agrees to indemnify and defend Lender and hold Lender
harmless from and against any and all Losses paid, incurred or suffered by, or
asserted against Lender for, with respect to, or as a direct or indirect result
of, the non-compliance of the Property with the Accessibility Laws whether or
not caused by, or within the control of, Borrower, and

                                                         Oklahoma City, Oklahoma

                                       8


including any claims of Lender's negligence or strict liability, but excluding
Lender's willful misconduct or gross negligence.

         Liability under this Section 3(c) and similar provisions in this
Mortgage and the other Loan Documents concerning Accessibility Laws shall
survive repayment of the Note and satisfaction of this Mortgage; provided,
however, Borrower shall not be liable under this Section 3(c) for compliance
with any Accessibility Laws if such Accessibility Laws first become effective,
or such violations result from alterations or improvements to the Property that
are performed subsequent to Lender's acquisition of the Property by foreclosure
or acceptance of a deed in lieu thereof or subsequent to any transfer which was
approved or authorized by Lender pursuant to this Mortgage, provided that such
transferee assumes in writing all obligations pertaining to the Accessibility
Laws pursuant to this Mortgage and the other Loan Documents. The burden of proof
under this Section 3(c) with regard to establishing the date upon which such
non-compliance with any Accessibility Laws occurred at the Property shall be
upon Borrower.

         (d)      Lender, and/or its agents, shall have the right and shall be
permitted, subject to the rights of Borders under the Borders Lease, but shall
not be required, at all reasonable times, to enter upon and inspect the Property
to insure compliance with the foregoing covenants, and any and all other terms,
covenants, conditions and agreements set forth in this Mortgage.

         4.       PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Borrower
shall pay, or cause to be paid, all taxes, assessments and other charges as
already levied or assessed, or that may be hereafter levied or assessed, upon or
against the Property, when the same shall become due and payable according to
Law, before delinquency, and before any interest or penalty shall attach
thereto, and to deliver official receipts evidencing the payment of the same to
Lender not later than thirty (30) days following the payment of the same.
Borrower shall have the right to contest, in good faith and in accordance with
applicable Laws and procedures, the proposed assessment of ad valorem taxes or
special assessments by governmental authorities having jurisdiction over the
Property; provided, however, Borrower shall give Written Notice of its intent to
bring such an action to Lender, and Lender may, in its sole discretion, require
Borrower to post a bond or other collateral satisfactory to Lender (and
acceptable to the title company insuring this Mortgage) as a result of
Borrower's act.

         5.       PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Borrower shall
immediately pay and discharge from time to time when the same shall become due,
all lawful claims and demands of mechanics, materialmen, laborers, realtors,
brokers and others which, if unpaid, might result in, or permit the creation of,
a lien, charge or encumbrance upon the Property or any part thereof, or on the
Rents, arising therefrom and, in general, to do or cause to be done everything
necessary so that the lien of this Mortgage shall be fully

                                                         Oklahoma City, Oklahoma

                                       9


preserved, at the sole cost of Borrower, without expense to Lender. Borrower
shall have the right to contest, in good faith and in accordance with applicable
Laws and procedures, mechanics', materialmens' and other such liens filed
against the Property; provided however, that Borrower shall give Written Notice
to Lender of its intent to bring such action, and Lender may, in Lender's sole
discretion, require Borrower to post a bond or other collateral satisfactory to
Lender (and acceptable to the title company insuring this Mortgage) as a result
of Borrower's act.

         6.       PAYMENT OF JUNIOR ENCUMBRANCES. Borrower shall permit no
default or delinquency under any other lien, imposition, charge or encumbrance
against the Property, even though junior and inferior to the lien of this
Mortgage; provided however, the foregoing shall not be construed to permit any
such additional lien or encumbrance against the Property, other than the
Permitted Exceptions.

         7.       PAYMENT OF MORTGAGE TAXES. Borrower shall pay any and all
taxes which may be levied or assessed directly or indirectly upon the Note
and/or this Mortgage (except for income taxes payable by Lender) or the Loan,
without regard to any Law which may be hereafter enacted imposing payment of the
whole or any part thereof upon Lender, its successors or assigns. Upon violation
of this covenant, or upon the rendering by any court of competent jurisdiction
of a decision that such a covenant by Borrower is legally inoperative, or if any
court of competent jurisdiction shall render a decision that the rate of said
tax when added to the rate of interest provided for in the Note exceeds the then
maximum rate of interest allowed by Law, then, and in any such event, the debt
hereby secured shall, at the option of Lender, its successors or assigns, become
immediately due and payable, anything contained in this Mortgage or in the Note
notwithstanding, without the imposition of a Prepayment Premium (as defined in
the Note). The additional amounts which may become due and payable hereunder
shall become a part of the Loan secured by this Mortgage.

         8.       HAZARD INSURANCE. Borrower shall continuously, during the term
of this Mortgage, keep the Improvements, Appurtenances, and Fixtures and
Personal Property, now or hereafter existing, erected, installed and located in
or upon the Real Property, insured with extended coverage insurance against loss
or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine
subsidence, acts of terrorism, and such other hazards, casualties, contingencies
and perils including, without limitation, other risks insured against by persons
operating like properties in the locality of the Property, or otherwise deemed
necessary or advisable by Lender or any Rating Agency (as hereinafter defined),
on such forms and with such deductibles as may be required by Lender or any
Rating Agency, covering the Property in the amount of the full replacement cost
thereof, (without taking into account any depreciation) less excavating and
foundation costs, and covering all loss or abatement of rental or other income,
without a provision for co-insurance, in an amount equal to the scheduled rental
income of the Property for at least twelve (12) months, or if applicable,
business interruption insurance in an amount sufficient to pay debt service on
the Note, operating expenses, taxes

                                                         Oklahoma City, Oklahoma

                                       10


and insurance on the Property for a period of twelve (12) months, and covering
loss by flood (if the Property lies in a Special Flood Hazard Area as designated
on the Department of Housing and Urban Development's Maps, or other flood prone
designation) in an amount equal to the outstanding principal balance of the Loan
or such other amount as approved by Lender, and earthquake insurance with a
deductible amount of no more than ten percent (10%) of the policy amount if, in
the judgment of Lender's inspecting architect, the Property lies in an area of
anticipated significant seismic activity, and "Ordinance or Law Coverage" or
"Enforcement" endorsements in amounts satisfactory to Lender if any of the
Improvements or the use of the Property shall at any time constitute legal
non-conforming structures or uses or the ability to rebuild the Improvements is
restricted or prohibited, and comprehensive boiler and machinery insurance
(without exclusion for explosion), if applicable, in amounts as shall be
reasonably required by Lender or any Rating Agency and covering all boilers or
other pressure vessels, machinery and equipment located at or about the Property
(including, without limitation, electrical equipment, sprinkler systems, heating
and air conditioning equipment, refrigeration equipment and piping). All such
insurance shall be carried with a company or companies licensed to do business
in the State, which is acceptable to Lender, which company or companies shall
have a rating at the time this Mortgage is executed equivalent to at least A:X
as shown in the most recent Best's Key Rating Guide. The original policy or
policies and renewals thereof (or, at the sole option of Lender, duplicate
originals or certified copies thereof), together with receipts evidencing
payment of the premium therefor, shall be deposited with, held by and are hereby
assigned to, Lender as additional security for the Loan. Each such policy of
insurance shall contain a noncontributing loss payable clause in favor of and in
a form acceptable to Lender, and shall provide for not less than thirty (30)
days prior Written Notice to Lender of any intent to modify, non-renew, cancel
or terminate the policy or policies, or the expiration of such policies of
insurance, or the exclusion of any individual risk such as acts of terrorism. If
the insurance required under this Section 8 or any portion thereof is maintained
pursuant to a blanket policy, Borrower shall furnish to Lender a certified copy
of such policy, together with an original Evidence of Insurance Certificate
(Acord Form 27) for hazard insurance indicating that Lender is an additional
insured under such policy in regard to the Property and showing the amount of
coverage apportioned to the Property, which coverage shall be in an amount
sufficient to satisfy the requirements hereof. Not less than fifteen (15) days
prior to the expiration dates of each policy required of Borrower hereunder,
Borrower will deliver to Lender a renewal policy or policies marked "premium
paid" or accompanied by other evidence of payment and renewal satisfactory to
Lender. In the event of foreclosure of this Mortgage or other transfer of title
to the Property in extinguishment of the Loan, all right, title and interest of
Borrower, in and to any insurance policies then in force including any rights to
unearned premiums, and in and to insurance proceeds then payable, shall pass to
the purchaser or grantee.

         For so long as the Borders Lease remains in effect with Borders as the
tenant thereunder, then to the extent that Borders self-insures to satisfy its
insurance obligations under the Borders Lease, Lender shall accept such
self-insurance as satisfying the obligation of

                                                         Oklahoma City, Oklahoma

                                       11


Borrower to provide insurance under this Section 8, provided that (i) Borders,
or the guarantor of the Borders Lease, Borders Group, Inc., maintains a minimum
net worth of not less than Two Hundred Fifty Million Dollars ($250,000,000.00),
(ii) such self-insurance otherwise satisfies the requirements of this Section 8
as to the amount required to be maintained by Borders, and (iii) Borrower
provides to Lender written verification of such coverage in form and substance
reasonably acceptable to Lender. Notwithstanding the foregoing, Lender shall
have the right to require Borrower to maintain in effect a separate policy of
liability insurance with respect to the Property meeting the requirements of
Section 9 of this Mortgage.

         In the event of loss covered by insurance maintained by Borrower with
respect to the Property, including, without limitation, insurance covering
hazards, casualties, contingencies and perils for which insurance has been
required by Lender hereunder, Borrower shall give immediate notice thereof to
Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an
interest for Lender to, at its option, make proof of loss and/or to file a claim
thereunder. Each insurance company concerned is hereby notified, authorized and
directed to make payment for such loss directly to Lender, instead of to
Borrower and Lender jointly, and Borrower hereby authorizes Lender to adjust and
compromise any losses for which insurance proceeds are payable under any of the
aforesaid insurance policies and, after deducting the costs of collection, to
apply the proceeds of such insurance, at its option either: (a) to the
restoration or repair of the insured Improvements, Appurtenances, and Fixtures
and Personal Property, provided that, in the opinion and sole discretion of
Lender, such restoration or repair is reasonably practical and, provided
further, that, in the opinion and sole discretion of Lender, either: (i) the
insurance proceeds so collected are sufficient to cover the cost of such
restoration or repair of the damage or destruction with respect to which such
proceeds were paid, or (ii) the insurance proceeds so collected are not
sufficient alone to cover the cost of such restoration or repair, but are
sufficient therefor when taken together with funds provided and made available
by Borrower from other sources; in which event Lender shall make such insurance
proceeds available to Borrower for the purpose of effecting such restoration or
repair; but Lender shall not be obligated to see to the proper application of
such insurance proceeds nor shall the amount of funds so released or used be
deemed to be payment of or on account of the Loan; or (b) to the reduction of
the Loan, notwithstanding the fact that the amount owing thereon may not then be
due and payable or that said Loan is otherwise adequately secured, in which
event such proceeds shall be applied at par against the Loan and the monthly
payment due on account of such Loan shall be reduced accordingly as calculated
by Lender. None of such actions taken by Lender shall be deemed to be or result
in a waiver or impairment of any equity, lien or right of Lender under and by
virtue of this Mortgage, nor will the application of such insurance proceeds to
the reduction of the Loan serve to cure any default in the payment thereof. In
the event of foreclosure of this Mortgage or other transfer of title to the
Property in extinguishment of the Loan, all right, title and interest of
Borrower in and to any insurance policies then in force including any rights to
unearned premiums and in and to insurance proceeds then payable, shall pass to
the purchaser or grantee.

                                                         Oklahoma City, Oklahoma

                                       12


         In case of Borrower's failure to keep the Property properly insured as
required herein, Lender, its successors or assigns, may, at its option (but
shall not be required to) acquire such insurance as required herein at
Borrower's sole expense.

         Notwithstanding anything set forth in this Section 8 to the contrary,
in the event of loss or damage to the Property by fire or other casualty covered
by insurance maintained by Borrower with respect to the Property, including,
without limitation, insurance which has been required by Lender hereunder and
provided by Borrower, and the amount of such loss or damage does not exceed
twenty-five percent (25%) of the unpaid principal balance of the Note, Lender
hereby agrees to allow the proceeds of insurance to be used for the restoration
of the Property and to release such insurance proceeds to Borrower as such
restoration progresses, provided:

                  (a)      Borrower is not in default under any of the terms,
covenants and conditions of this Mortgage, the Note or any of the other Loan
Documents;

                  (b)      The Improvements, after such restoration, shall be at
least eighty percent (80%) leased pursuant to leases approved in writing by
Lender;

                  (c)      The plans and specifications for the restoration of
the Property are approved in writing by Lender in advance;

                  (d)      At all times during such restoration, Borrower has
deposited with Lender funds which, when added to the insurance proceeds received
by Lender, are sufficient to complete the restoration of the Property in
accordance with the approved plans and specifications, and all applicable
building codes, zoning ordinances, regulations and Accessibility Laws, and
further, that the funds retained by Lender are sufficient to complete the
restoration of the Property as certified to Lender by Lender's inspecting
architect/engineer;

                  (e)      Borrower provides suitable completion, payment and
performance bonds, builders' all risk insurance, and all necessary licenses and
permits for such restoration in form and amount acceptable to Lender;

                  (f)      The insurer under such policies of fire or other
casualty insurance does not assert any defense to payment under such policies
against Lender, Borrower, any tenant, or third party of Borrower with regard to
the Property;

                  (g)      Lender shall have the option, upon the completion of
such restoration of the Property, to apply any surplus insurance proceeds
remaining after the completion of such restoration, at par, to the reduction of
the outstanding principal balance of the Note; notwithstanding the fact that the
amount owing thereon may not then be due and payable or that said Loan is
otherwise adequately secured;

                                                         Oklahoma City, Oklahoma

                                       13


                  (h)      The funds held by Lender shall be disbursed no more
often than once per month and in not more than five (5) increments of not less
than Fifty Thousand Dollars ($50,000) each, except the final disbursement of
such funds which may be in an amount less than Fifty Thousand Dollars ($50,000);

                  (i)      Lender's obligation to make any such disbursement
shall be conditioned upon Lender's receipt of written certification from
Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender
by Borrower) that all construction and work for which such disbursement is
requested has been completed in accordance with the approved plans and
specifications and in accordance with all applicable building codes, zoning
ordinances and all other Laws and, further, that Borrower has deposited with
Lender sufficient funds to complete such restoration in accordance with Section
8(d);

                  (j)      In the reasonable judgment of the Lender, the
Property can be restored within six months after insurance proceeds are made
available and at least six months prior to the Maturity Date (as defined in the
Note) to an economic unit not less valuable (including an assessment by Lender
of the impact of the termination of any Occupancy Leases (as hereinafter
defined) due to such casualty) and not less useful than the same was prior to
the casualty, and after such restoration will adequately secure the outstanding
balance of the Loan; and

                  (k)      Lender shall be entitled to require and to impose
such other conditions to the release of such funds as would be customarily or
reasonably be required and imposed by institutional mortgage lenders for a
project of similar nature and cost.

         In the event of a casualty, provided that Borrower is not then in
default hereunder beyond the expiration of applicable notice and cure periods,
then notwithstanding any provision of this Section 8 to the contrary, Lender
shall make insurance proceeds available for restoration of the Property to the
extent required under the terms of the Borders Lease.

         9.       LIABILITY INSURANCE. Borrower shall carry and maintain such
commercial general liability insurance as may from time to time be required by
Lender or any Rating Agency, taking into consideration the type of property
being insured and the corresponding liability exposure, on forms, with
deductibles, in amounts and with such company or companies licensed to do
business in the State and as may be acceptable to Lender. All such commercial
general liability insurance shall be carried with a company or companies which
have and maintain a rating equivalent to at least A:X as shown in the most
recent Best's Key Rating Guide. The original policy or policies and all renewals
thereof (or, at the sole option of Lender, duplicate originals or certified
copies thereof), together with a Certificate of Insurance (Acord Form 25S) and
receipts evidencing payment of the premium therefor, shall be deposited with,
held by and are hereby assigned to, Lender as additional security for the Loan.
Such policy or policies of insurance shall name Lender as an additional insured
and shall provide for not less than thirty (30) days prior Written Notice to
Lender of any intent to

                                                         Oklahoma City, Oklahoma

                                       14


modify, cancel, non-renew, or terminate the policy or policies or the expiration
of such policy or policies of insurance, or the exclusion of any individual risk
such as acts of terrorism. Not less than fifteen (15) days prior to the
expiration dates of each policy or policies required of Borrower hereunder,
Borrower will deliver to Lender a renewal policy or policies marked "premium
paid" or accompanied by other evidence of payment and renewal satisfactory to
Lender. In the event of foreclosure of this Mortgage or other transfer of title
to the Property in extinguishment of the Loan, all right, title and interest of
Borrower, in and to any insurance policies then in force including any rights to
unearned premiums, and in and to insurance proceeds then payable, shall pass to
the purchaser or grantee. In case of Borrower's failure to keep the Property
properly insured as required herein, Lender, its successors or assigns, may, at
its option (but shall not be required to) acquire such insurance as required
herein at Borrower's sole expense.

         10.      COMPLIANCE WITH LAWS.

                  (a)      Borrower shall observe, abide by and comply with all
federal, regional, state and local laws, codes, ordinances, statutes, rules,
regulations, decisions, orders, requirements or decrees relating to the Property
enacted, promulgated or issued by any federal, state, county or local
governmental or quasi-governmental authority or any agency or subdivision
thereof having jurisdiction over Borrower or the Property, which now or
hereafter affect Borrower or the Property, including Hazardous Waste Laws and
Accessibility Laws (collectively, the "LAWS"), and to observe and comply with
all conditions and requirements necessary to preserve and extend any and all
rights, licenses, permits (including, but not limited to, zoning, variances,
special exceptions and nonconforming uses), privileges, franchises and
concessions which are applicable to the Property, or which have been granted to
or contracted for by Borrower in connection with any existing, presently
contemplated or future uses of the Property.

                  (b)      Borrower shall not engage in any transaction which
would cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Note, this Mortgage and the
other Loan Documents) to be a non-exempt (under a statutory or administrative
class exemption) prohibited transaction under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Borrower shall deliver to Lender
such certifications or other evidence from time to time throughout the term of
this Mortgage, as requested by Lender in its sole discretion, that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a "governmental plan" within the meaning of
Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:

                                                         Oklahoma City, Oklahoma

                                       15


                           (1)      Equity interests in Borrower are publicly
         offered securities, within the meaning of 29 C.F.R. Section
         2510.3-101(b)(2);

                           (2)      Less than twenty-five percent (25%) of each
         outstanding class of equity interests in Borrower are held by "benefit
         plan investors" within the meaning of 29 C.F.R. Section
         2510.3-101(f)(2); or

                           (3)      Borrower qualifies as an "operating company"
         or a "real estate operating company" within the meaning of 29 C.F.R.
         Section 2510.3-101(c) or (e) or an investment company registered under
         The Investment Company Act of 1940.

         11.      MAINTENANCE OF PERMITS. Borrower shall obtain, keep and
constantly maintain in full force and effect during the entire term of this
Mortgage, all certificates, licenses and permits necessary to keep the Property
operating for the Existing Use and, except as specifically provided for in this
Mortgage, not to assign, transfer or in any manner change such certificates,
licenses or permits without first receiving the written consent of Lender.

         12.      OBLIGATIONS OF BORROWER AS LESSOR.

                  (a)      Borrower shall perform every obligation of Borrower
(as the landlord) and enforce every obligation of the tenant in any and every
lease, license or other occupancy agreement of or affecting the Property or any
part thereof (the "OCCUPANCY LEASES"), and not modify, alter, waive or cancel
any such Occupancy Leases or any part thereof or rights thereunder, without the
prior written consent of Lender (but such consent shall not be required for such
action as to Occupancy Leases of three thousand (3,000) square feet or less if
such action is in the ordinary course of business of owning and operating the
Property in a prudent and business-like manner, on then current market terms),
nor collect for more than thirty (30) days in advance of the date due any Rents
that may be collectible under any such Occupancy Leases and, except as provided
for in this Mortgage, not assign any such Occupancy Lease(s) or any such Rents
relating thereto, to any party other than Lender, without the prior written
consent of Lender. Borrower will notify Lender in writing of any default under
any Occupancy Lease. In the event of default under any such Occupancy Lease by
reason of failure of Borrower to keep or perform one or more of the covenants,
agreements or conditions thereof, Lender is hereby authorized and empowered, and
may, at its sole option, remedy, remove or cure any such default, and further,
Lender may, at its sole option and in its sole discretion but without obligation
to do so, pay any sum of money deemed necessary by Lender for the performance of
said covenants, agreements and conditions, or for the curing or removal of any
such default, and incur all expenses and obligations which Lender may consider
necessary or reasonable in connection therewith, and Borrower shall repay on
demand all such sums so paid or advanced by Lender together with interest
thereon until paid at the lesser of either: (i) the highest rate of interest
then allowed by the Laws of the State, or, if controlling, the Laws of the
United States, or (ii) the then applicable interest rate of the Note plus five

                                                         Oklahoma City, Oklahoma

                                       16


hundred (500) basis points per annum; all of such sums, if unpaid, shall be
added to and become part of the Loan.

                  (b)      All such Occupancy Leases hereafter made shall be
subject to the approval of Lender and: (i) shall be at competitive market rental
rates then prevailing in the geographic area for projects used for the Existing
Use comparable to the Property; (ii) shall have lease terms of not less than
three years; and (iii) at Lender's option, shall be superior or subordinate in
all respects to the lien of this Mortgage. Provided, however, that Lender shall
not require approval in advance of any Occupancy Leases which conform to the
Borrower's Form Lease (as hereinafter defined) as previously approved by Lender,
except as set forth below. Neither the right nor the exercise of the right
herein granted unto Lender to keep or perform any such covenants, agreements or
conditions as aforesaid shall preclude Lender from exercising its option to
cause the whole Loan to become immediately due and payable by reason of
Borrower's default in keeping or performing any such covenants, agreements or
conditions.

                  (c)      Lender has approved a form of Occupancy Lease to be
used by Borrower in connection with the Property (the "FORM LEASE"). Borrower
shall not, without the prior written consent of Lender, modify or alter the Form
Lease in any material respect. In addition, Borrower shall not, without the
prior written consent of Lender, surrender, terminate, modify or alter, either
orally or in writing, any Occupancy Lease now existing or hereafter made with
any Major Tenant (as hereinafter defined) for all or part of the Property,
permit an assignment or sublease of any such Occupancy Lease, or request or
consent to the subordination of any Occupancy Lease to any lien subordinate to
this Mortgage. Borrower shall furnish Lender with copies of all executed
Occupancy Leases of all or any part of the Property now existing or hereafter
made, and Borrower shall assign to Lender (which assignment shall be in form and
content acceptable to Lender), as additional security for the Note and the Loan,
all Occupancy Leases now existing or hereafter made for all or any part of the
Property.

                  (d)      Notwithstanding the foregoing approval by Lender of
Borrower's Form Lease, Lender hereby specifically reserves the right to approve
all prospective tenants under all Occupancy Leases hereafter proposed to be made
if either: (i) the term thereof, excluding options to renew the same, exceeds
five years; or (ii) the net rentable area to be occupied thereunder, including
expansion options, exceeds ten percent (10%) of the net leasable area of each of
the buildings comprising the Improvements (the tenants under such leases being
hereinafter referred to as "MAJOR TENANTS"). Borrower shall notify Lender in
writing of all prospective Major Tenants, and shall deliver to Lender, at
Borrower's sole cost and expense, a copy of the prospective Major Tenant's
current financial statement and the most recent Dun & Bradstreet credit report
on said prospective Major Tenant. The financial statement delivered to Lender
hereunder shall be certified as true and correct by the Major Tenant, or, if
available, by a certified public accountant.

                                                         Oklahoma City, Oklahoma

                                       17


                  (e)      In no event shall Borrower exercise any right to
relocate any tenant outside the Property pursuant to any right set forth in an
Occupancy Lease without the prior written consent of Lender.


         13.      MAINTENANCE OF PARKING & ACCESS PROHIBITION AGAINST
ALTERATION; SEPARATE TAX LOT.

                  (a)      Borrower shall construct, keep and constantly
maintain, as the case may be, all curbs, drives, parking areas and the number of
parking spaces heretofore approved by Lender, or heretofore or hereafter
required by any Laws or any governmental body, agency or authority having
jurisdiction over Borrower or the Property, and as required by the terms of the
Occupancy Leases, and not to alter, erect, build or construct upon any portion
of the Property, any building, structure or improvement of any kind whatsoever,
the erection, building or construction of which has not been previously approved
by Lender in writing, which approval shall be at the sole discretion of Lender.

                  (b)      Borrower shall cause the Property to remain
separately assessed for real estate tax purposes as a separate tax lot or lots.

         14.      EXECUTION OF ADDITIONAL DOCUMENTS. Borrower shall do, make,
execute, acknowledge, witness and deliver all deeds, conveyances, mortgages,
deeds of trust, assignments, estoppel certificates, subordination
non-disturbance and attornments, notices of assignments, transfers, assurances,
security agreements, financing statements and renewals thereof, and all other
instruments or other acts necessary, as Lender shall from time to time require
for the purpose of better assuring, conveying, assigning, transferring, securing
and confirming unto Lender the Property and rights hereby encumbered, created,
conveyed, assigned or intended now or hereafter so to be encumbered, created,
conveyed or assigned, or which Borrower may now be or may hereafter become bound
to encumber, create, convey or assign to Lender, or for the purpose of carrying
out the intention or facilitating the performance of the terms of this Mortgage,
or for filing, registering or recording this Mortgage, and to pay all filing,
registration or recording fees and all taxes, costs and other expenses,
including Reasonable Attorneys' Fees, incident to the preparation, execution,
acknowledgment, delivery and recordation of any of the same. By signing this
Mortgage, Borrower authorizes Lender to file such financing statements, with or
without the signature of Borrower, as Lender may elect, as may be necessary or
desirable to perfect the lien of Lender's security interest in the Fixtures and
Personal Property. Without limiting any other provision herein, Borrower hereby
authorizes Lender to file one or more financing statements and any renewal or
continuation statements thereof, describing the Property and the proceeds of the
Property, including, without limitation, a financing statement covering "all
assets of Borrower all proceeds therefrom, and all rights and privileges with
respect thereto." Borrower further authorizes Lender to file, with or without
any additional signature from Borrower, as Lender may elect, such amendments and
continuation statements as Lender may deem

                                                         Oklahoma City, Oklahoma

                                       18


necessary or desirable from time to time to perfect or continue the lien of
Lender's security interest in the Fixtures and Personal Property. Borrower
hereby ratifies any financing statements that may have been filed by Lender in
advance of the date hereof to perfect Lender's security interest in the Fixtures
and Personal Property.

         15.      AFTER-ACQUIRED PROPERTY SECURED. Borrower shall subject to the
lien of this Mortgage all right, title and interest of Borrower in and to all
extensions, improvements, betterments, renewals, substitutions and replacements
of, and all additions and appurtenances to, the Property hereinabove described,
hereafter acquired by or released to Borrower, or constructed, assembled or
placed by Borrower on the Real Property, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, deed of trust, encumbrance, conveyance, assignment
or other act by Borrower, as fully, completely and with the same effect as
though now owned by Borrower and specifically described herein, but at any and
all times, Borrower will execute and deliver to Lender any and all such further
assurances, mortgages, deeds of trust, conveyances, security agreements,
financing statements or assignments thereof or security interests therein as
Lender may reasonably require for the purpose of expressly and specifically
subjecting the same to the lien of this Mortgage.

         16.      PAYMENTS BY LENDER ON BEHALF OF BORROWER. Borrower shall make
payment of any taxes, assessments or public charges on or with respect to the
Property before the same shall become delinquent, or to make payment of any
insurance premiums or other charges, impositions, or liens herein or elsewhere
required to be paid by Borrower, or if Borrower shall fail so to do, then
Lender, at its sole option, but without obligation to do so, may make payment or
payments of the same and also may redeem the Property from tax sale without any
obligation to inquire into the validity of such taxes, assessments, charges,
impositions or liens. In the case of any such payment by Lender, Borrower agrees
to reimburse Lender, upon demand therefor, the amount of such payment and of any
fees and expenses attendant in making the same, together with interest thereon
at the lesser of either: (a) the highest rate of interest then allowed by the
Laws of the State or, if controlling, the Laws of the United States, or (b) the
then applicable interest rate of the Note plus five hundred (500) basis points
per annum; and until paid such amounts and interest shall be added to and become
part of the Loan to the same extent that this Mortgage secures the repayment of
the Loan. In making payments authorized by the provisions of this Section 16,
Lender may do so whenever, in Lender's sole judgment and discretion, such
advance or advances are necessary or desirable to protect the full security
intended to be afforded by this Mortgage. Neither the right nor the exercise of
the rights herein granted to Lender to make any such payments as aforesaid shall
preclude Lender from exercising its option to cause the Loan to become
immediately due and payable by reason of Borrower's default in making such
payments as hereinabove required.

                                                         Oklahoma City, Oklahoma

                                       19


         17.      FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE
PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this
Mortgage, Borrower shall deposit with Lender, together with and in addition to
each monthly payment due on account of the Loan, an amount equal to one-twelfth
(1/12th) of the annual total of such taxes, assessments, insurance premiums and
other charges (all as estimated by Lender in its sole discretion) so that, at
least thirty (30) days prior to the due date thereof, Lender shall be able to
pay in full all such taxes, assessments, insurance premiums and other charges as
the same shall become due. Lender may hold the sums so deposited without paying
interest, commingle same with its general funds and/or apply the same to the
payment of said taxes, assessments, insurance premiums or other charges as they
become due and payable. If at any time the funds so held by Lender are
insufficient to pay such taxes, assessments, insurance premiums or other charges
as they become due and payable, Borrower shall immediately, upon Written Notice
and demand by Lender, deposit with Lender the amount of such deficiency. The
failure on the part of Borrower to do so shall entitle Lender, at Lender's sole
option, to make such payments in accordance with the rights and pursuant to the
conditions elsewhere provided in this Mortgage. Borrower hereby grants to Lender
a security interest in all funds deposited with Lender, and such funds are
hereby pledged by Borrower to Lender for the purpose of securing all
indebtedness and obligations secured by this Mortgage. Whenever any default
exists under this Mortgage, Lender may, at Lender's sole option but without an
obligation so to do, apply any funds so held by Lender pursuant to this Section
17 toward the payment of the Loan, notwithstanding the fact that the amount
owing thereon may not then be due and payable or that the Loan may otherwise be
adequately secured, in such order and manner of application as Lender may elect.

         18.      CONDEMNATION; EMINENT DOMAIN. All claims and rights of action
for, and all awards and other compensation heretofore or hereafter made to
Borrower and all subsequent owners of the Property in any taking by eminent
domain, recovery for inverse condemnation or by deed in lieu thereof, whether
permanent or temporary, of all or any part of the Property or any easement or
any appurtenance thereto, including severance and consequential damages and
change in grade of any way, street, avenue, road, alley, passage or public
place, are hereby assigned to Lender. Borrower hereby irrevocably appoints
Lender as its attorney-in-fact, coupled with an interest, and authorizes,
directs and empowers Lender, at the option of Lender as said attorney-in-fact,
on behalf of Borrower, its successors and assigns, to adjust or compromise the
claim for any such award, and alone to collect and receive the proceeds thereof,
to give proper receipts and acquittances therefor and, after deducting any
expenses of collection, Lender shall at its sole option either:

                  (a)      apply the net proceeds as a credit upon any portion
of the Loan, as selected by Lender, notwithstanding the fact that the amount
owing thereon may not then be due and payable, or that the Loan is otherwise
adequately secured. In the event Lender applies such awards to the reduction of
the outstanding Loan evidenced by the Note, such proceeds shall be applied at
par, and the monthly installments due and payable under the Note shall be

                                                         Oklahoma City, Oklahoma

                                       20


reduced accordingly as calculated by Lender; however no such application shall
serve to cure an existing default of Borrower; or

                  (b)      hold said proceeds without any allowance of interest,
and make the same available for restoration or rebuilding of the Improvements.
In the event that Lender makes said proceeds available to reimburse Borrower for
the cost of the restoration or rebuilding of the Improvements on the Real
Property, such proceeds shall be made available in the manner and under the same
conditions as required under Section 8 hereof. If the proceeds are made
available by Lender to reimburse Borrower for the cost of said restoration or
rebuilding, any surplus which may remain out of said award after payment of such
cost of restoration or rebuilding, shall be applied on account of the Loan at
par notwithstanding the fact that the amount owing thereon may not then be due
and payable or that the Loan may otherwise be adequately secured.

         In the event of a taking or condemnation, provided that Borrower is not
then in default hereunder beyond the expiration of applicable notice and cure
periods, then notwithstanding any provision of this Section 18 to the contrary,
Lender shall make condemnation proceeds available for restoration of the
Property to the extent required under the terms of the Borders Lease.

         Borrower further covenants and agrees to give Lender immediate notice
of the actual or threatened commencement of any proceedings under eminent
domain, and to deliver to Lender copies of any and all papers served in
connection with any such proceedings. Borrower further covenants and agrees to
make, execute and deliver to Lender, at any time or times, upon request, free,
clear and discharged of any encumbrance of any kind whatsoever, any and all
further assignments and/or other instruments deemed necessary by Lender for the
purpose of validly and sufficiently assigning all such awards and other
compensation heretofore or hereafter made to Lender (including the assignment of
any award from the United States government at any time after the allowance of
the claim therefor, the ascertainment of the amount thereof and the issuance of
the warrant for payment thereof).

         It shall be a default hereunder if either: (i) any part of any of the
Improvements situated on the Real Property shall be condemned by any
governmental authority having jurisdiction; or (ii) lands constituting a portion
of the Real Property shall be condemned by any governmental authority having
jurisdiction, such that the remaining Property is in violation of applicable
parking, zoning, platting, or other ordinances, or fails to comply with the
terms of the Occupancy Leases with Major Tenants. In either of said events,
Lender shall be entitled to exercise any or all remedies provided or referenced
in this Mortgage or the other Loan Documents, including the application of
condemnation proceeds to the outstanding principal balance of the Note at par,
and the right to accelerate the maturity date of the Note and require payment in
full without the imposition of a Prepayment Premium (as defined in the Note).

                                                         Oklahoma City, Oklahoma

                                       21


         19.      COSTS OF COLLECTION. In the event that the Note is placed in
the hands of an attorney for collection, or in the event that Lender shall
become a party either as plaintiff or as defendant, in any action, suit, appeal
or legal proceeding (including, without limitation, foreclosure, condemnation,
bankruptcy, administrative proceedings or any proceeding wherein proof of claim
is by law required to be filed), hearing, motion or application before any court
or administrative body in relation to the Property or the lien and security
interest granted or created hereby or herein, or for the recovery or protection
of the Loan or the Property, or for the foreclosure of this Mortgage, or for the
enforcement of the terms and conditions of the Loan Documents, Borrower shall
indemnify, save, defend and hold Lender harmless from and against any and all
Losses incurred by Lender on account thereof, and Borrower shall repay, on
demand, all such Losses, together with interest thereon until paid at the lesser
of either (a) the highest rate of interest then allowed by the Laws of the
State, or, if controlling, the Laws of the United States, or (b) the then
applicable rate of interest of the Note plus five hundred (500) basis points per
annum; all of which sums, if unpaid, shall be added to and become a part of the
Loan.

         20.      DEFAULT RATE. Any sums not paid when due, whether maturing by
lapse of time or by reason of acceleration under the provisions of the Note,
this Mortgage or any of the other Loan Documents, and whether principal,
interest or money owing for advancements pursuant to the terms of this Mortgage
or any other Loan Document, shall bear interest until paid at the lesser of
either (a) the highest rate of interest then allowed by the Laws of the State,
or, if controlling, the Laws of the United States, or (b) the then applicable
rate of interest of the Note plus five hundred (500) basis points per annum; all
of which sums shall be added to and become a part of the Loan.

         21.      SAVINGS CLAUSE. Notwithstanding any provisions in the Note or
in this Mortgage to the contrary, the total liability for payments in the nature
of interest, including but not limited to Prepayment Premiums, default interest
and late payment charges, shall not exceed the limits imposed by the Laws of the
State or, if controlling, the Laws of the United States, relating to maximum
allowable charges of interest. Lender shall not be entitled to receive, collect
or apply, as interest on the Loan, any amount in excess of the maximum lawful
rate of interest permitted to be charged by any Laws. In the event Lender ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to reduce the unpaid principal
balance of the Loan evidenced by the Note. If the unpaid principal balance of
such Loan has been paid in full, any remaining excess shall be forthwith
returned to Borrower.

         22.      BANKRUPTCY, REORGANIZATION OR ASSIGNMENT.

                  (a)      It shall be a default hereunder if Borrower or any
general partner or managing member of Borrower shall: (a) elect to dissolve or
liquidate its business organization or wind up its business affairs without
receiving the prior written approval of

                                                         Oklahoma City, Oklahoma

                                       22


Lender; (b) consent to the appointment of a receiver, trustee or liquidator of
all or a substantial part of its assets; (c) be adjudicated as bankrupt or
insolvent, or file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due; (d) make a general assignment for
the benefit of creditors; (e) file a petition under or take advantage of any
insolvency law; (f) file an answer admitting the material allegations of a
petition filed against Borrower or any general partner or managing member of
Borrower in any bankruptcy, reorganization or insolvency proceeding, or fail to
cause the dismissal of such petition within thirty (30) days after the filing of
said petition; (g) take action for the purpose of effecting any of the
foregoing; or (h) if any order, judgment or decree shall be entered upon an
application of a creditor of Borrower or any general partner or managing member
of Borrower by a court of competent jurisdiction approving a petition seeking
appointment of a receiver or trustee of all or a substantial part of Borrower's
assets or any of Borrower's general partner's or managing member's assets and
such order, judgment or decree shall continue unstayed and in effect for a
period of thirty (30) days.

                  (b)      Borrower covenants and agrees that it has not and
shall not:

                           (i)      engage in any business or activity other
         than the acquisition, ownership, operation and maintenance of the
         Property, and activities incidental thereto;

                           (ii)     acquire or own any material asset other than
         (1) the Property, and (2) such incidental Fixtures and Personal
         Property as may be necessary for the operation of the Property;

                           (iii)    merge into or consolidate with any person or
         entity or dissolve, terminate or liquidate in whole or in part,
         transfer or otherwise dispose of all or substantially all of its assets
         or change its legal structure, without in each case Lender's consent;

                           (iv)     fail to preserve its existence as an entity
         duly organized, validly existing and in good standing under the laws of
         the jurisdiction of its organization or formation, or without the prior
         written consent of Lender, amend, modify, terminate or fail to comply
         with the provisions of Borrower's Governing Documents (as hereafter
         defined);

                           (v)      own any subsidiary or make any investment in
         or acquire the obligations or securities of any other person or entity
         without the consent of Lender;

                           (vi)     commingle its assets with the assets of any
         of its partner, members, shareholders, affiliates, or of any other
         person or entity or transfer any assets to any such person or entity
         other than distributions on account of equity interests in the Borrower
         permitted hereunder and properly accounted for;

                                                         Oklahoma City, Oklahoma

                                       23


                           (vii)    incur any debt, secured or unsecured, direct
         or contingent (including guaranteeing any obligation, other than the
         Affiliate Loans), other than the Loan, except unsecured trade and
         operational debt incurred with trade creditors in the ordinary course
         of its business of owning and operating the Property in such amounts as
         are normal and reasonable under the circumstances, provided that such
         debt is not evidenced by a note and is paid when due and provided in
         any event the outstanding principal balance of such debt shall not
         exceed at any one time 1% of the outstanding Loan. Borrower shall not
         be deemed in default of the foregoing restrictions by virtue of any
         guaranty or cross default agreement delivered by Borrower with respect
         to the Affiliate Loans;

                           (viii)   allow any person or entity to pay its debts
         and liabilities (except a Guarantor (as hereinafter defined) - or in
         connection with the cross-default and cross collateralization of the
         Affiliate Loans) or fail to pay its debts and liabilities solely from
         its own assets;

                           (ix)     fail to maintain its records, books of
         account and bank accounts separate and apart from those of the
         shareholders, partners, members, principals and affiliates of Borrower,
         the affiliates of a shareholder, partner or member of Borrower, and any
         other person or entity or fail to prepare and maintain its own
         financial statements in accordance with generally accepted accounting
         principles and susceptible to audit, or if such financial statements
         are consolidated fail to cause such financial statements to contain
         footnotes disclosing that the Property is actually owned by the
         Borrower;

                           (x)      enter into any contract or agreement with
         any shareholder, partner, member, principal or affiliate of Borrower,
         any guarantor of all or a portion of the Loan (a "GUARANTOR") or any
         shareholder, partner, member, principal or affiliate thereof, except
         upon terms and conditions that are intrinsically fair and substantially
         similar to those that would be available on an arms-length basis with
         third parties other than any shareholder, partner, member, principal or
         affiliate of Borrower or Guarantor, or any shareholder, partner,
         member, principal or affiliate thereof;

                           (xi)     seek dissolution or winding up, in whole or
         in part;

                           (xii)    fail to correct any known misunderstandings
         regarding the separate identity of Borrower;

                           (xiii)   hold itself out to be responsible or pledge
         its assets or credit worthiness for the debts of another person or
         entity or allow any person or entity to hold itself out to be
         responsible or pledge its assets or credit worthiness for the debts of
         the Borrower (except for a Guarantor);

                                                         Oklahoma City, Oklahoma

                                       24


                           (xiv)    make any loans or advances to any third
         party, including any shareholder, partner, member, principal or
         affiliate of Borrower, or any shareholder, partner, member, principal
         or affiliate thereof, except as may be required in connection with the
         cross default and cross collateralization of the Affiliate Loans;

                           (xv)     fail to file its own tax returns, if
         required under applicable law, or to use separate contracts, purchase
         orders, stationary, invoices and checks, except that Borrower may file
         a consolidated tax return with Agree Limited Partnership for reporting
         purposes;

                           (xvi)    fail either to hold itself out to the public
         as a legal entity separate and distinct from any other entity or person
         or to conduct its business solely in its own name in order not (1) to
         mislead others as to the entity with which such other party is
         transacting business, or (2) to suggest that Borrower is responsible
         for the debts of any third party (including any shareholder, partner,
         member, principal or affiliate of Borrower, or any shareholder,
         partner, member, principal or affiliate thereof);

                           (xvii)   fail to allocate fairly and reasonably among
         Borrower and any third party (including, without limitation, any
         Guarantor) any overhead for common employees, shared office space or
         other overhead and administrative expenses;

                           (xviii)  allow any person or entity to pay the
         salaries of its own employees or fail to maintain a sufficient number
         of employees for its contemplated business operations;

                           (xix)    fail to maintain adequate capital for the
         normal obligations reasonably foreseeable in a business of its size and
         character and in light of its contemplated business operations;

                           (xx)     share any common logo with or hold itself
         out as or be considered as a department or division of (1) any
         shareholder, partner, principal, member or affiliate of Borrower, (2)
         any affiliate of a shareholder, partner, principal, member or affiliate
         of Borrower, or (3) any other person or entity or allow any person or
         entity to identify the Borrower as a department or division of that
         person or entity; or

                           (xxi)    conceal assets from any creditor, or enter
         into any transaction with the intent to hinder, delay or defraud
         creditors of the Borrower or the creditors of any other person or
         entity;

                                                         Oklahoma City, Oklahoma

                                       25


         23.      TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It
is understood by Borrower that time is of the essence hereof in connection with
all obligations of Borrower herein and any of the other Loan Documents.

         Lender, at its sole option, may declare the Loan, as well as all other
monies secured or evidenced hereby or by any of the other Loan Documents,
including, without limitation, all Prepayment Premiums (to the extent permitted
by the Laws of the State) and late payment charges, to be in default and
forthwith due and payable, in the event:

                           (1)      Borrower defaults in the payment of any
         monthly installment of the Note, whether of principal or interest, or
         both, or in the payment of any other sums of money referred to herein
         or in the Note, the Borrower Cross-Default Guaranty or in any of the
         other Loan Documents, promptly and fully when the same shall be due,
         without notice or demand from Lender to Borrower in regard to such
         Monetary Default (as hereinafter defined), and any such Monetary
         Default remains uncured for a period of five (5) days after Written
         Notice thereof has been given by Lender to Borrower, unless Lender has
         previously given Borrower such Written Notice for a failure to pay in
         the then-current Loan Year (as defined in the Note), in which event no
         such notice need be given and no right to cure need be afforded
         Borrower as to any further Monetary Default during such Loan Year.

                           (2)      Borrower breaches or defaults on any of the
         terms, covenants, conditions and agreements of the Note, the Borrower
         Cross-Default Guaranty, this Mortgage, or any other Loan Documents; or
         in the event that each and every one of said terms, covenants,
         conditions and agreements is not otherwise either duly, promptly and
         fully discharged or performed, and any such Non-Monetary Default (as
         hereinafter defined) remains uncured for a period of thirty (30) days
         after Written Notice thereof has been delivered from Lender to
         Borrower; unless such Non-Monetary Default cannot be cured within said
         thirty (30) day period, in which event Borrower shall have a reasonable
         period of time to complete cure, provided that action to cure such
         Non-Monetary Default is promptly commenced within said thirty (30) day
         period, and Borrower is, in Lender's sole judgment, not diminishing or
         impairing the value of the Property, and is diligently pursuing a cure
         to completion, but in no event longer than ninety (90) days.

                           (3)      Any representation or warranty of Borrower
         or of its members, general partners, principals, affiliates, agents or
         employees, or of any Guarantor made herein or in or in any other Loan
         Document, in any guaranty, or in any certificate, report, financial
         statement or other instrument or document furnished to Lender shall
         have been false or misleading in any material respect when made.

                                                         Oklahoma City, Oklahoma

                                       26


                           (4)      Any seizure or forfeiture of the Property,
         or any portion thereof, or Borrower's interest therein, resulting from
         criminal wrongdoing or other unlawful action of Borrower, its
         affiliates, or any tenant in the Property under any federal, state or
         local law.

                           (5)      If Borrower consummates a transaction which
         would cause this Mortgage or Lender's exercise of its rights under this
         Mortgage, the Note or the other Loan Documents to constitute a
         nonexempt prohibited transaction under ERISA or result in a violation
         of a state statute regulating governmental plans, subjecting Lender to
         liability for a violation of ERISA or a state statute.

                           (6)      Any default occurs in the performance of any
         covenant or obligation of Borrower or any other party under any
         indemnity or guaranty delivered to Lender in connection with the Loan
         and such default continues beyond the expiration of applicable notice
         and cure periods.

                           (7)      Any default occurs under any Affiliate Loan
         which default continues beyond the expiration of applicable notice and
         cure periods.

         Upon the occurrence of any one of the above events, and at the option
of Lender, the principal of and the interest accrued on the Loan and all other
sums secured by this Mortgage and the other Loan Documents shall immediately
become due and payable as if all of said sums of money were originally
stipulated to be paid on such day. In addition, Lender may avail itself of all
rights and remedies provided by law or equity, and may foreclose or prosecute a
suit at law or in equity as if all monies secured hereby had matured prior to
its institution, anything in this Mortgage or any of the other Loan Documents to
the contrary notwithstanding. Lender shall have no obligation to give Borrower
notice of, or any period to cure, any Monetary Default or any Incurable Default
(as hereinafter defined) prior to exercising its rights, powers, privileges and
remedies.

         As used herein, the term "MONETARY DEFAULT" shall mean any default
which can be cured by the payment of money such as, but not limited to, the
payment of principal and interest due under the Note, or the payment of taxes,
assessments and insurance premiums when due as provided in this Mortgage. As
used herein, the term "NON-MONETARY DEFAULT" shall mean any default that is not
a Monetary Default or an Incurable Default. As used herein, the term "INCURABLE
DEFAULT" shall mean either: (i) any voluntary or involuntary sale, assignment,
mortgaging, encumbering or transfer in violation of the covenants contained
herein or any of the other Loan Documents; or (ii) if Borrower, or any person or
entity comprising Borrower or any guarantor or indemnitor of the Loan, should
breach any of the provisions of Section 22.

                                                         Oklahoma City, Oklahoma

                                       27


         24.      FORECLOSURE. Upon the occurrence of a default hereunder,
Lender may institute an action to foreclose this Mortgage as to the amount so
declared due and payable, and thereupon the Property (or any portion thereof)
shall be sold according to law to satisfy and pay the same, together with all
costs, expenses and allowances thereof, including, without limitation,
Reasonable Attorneys' Fees. The Property may be sold in one parcel, several
parcels or groups of parcels, and Lender shall be entitled to bid at the sale,
and, if Lender is the highest bidder for the Property or any part or parts
thereof, Lender shall be entitled to purchase the same. The failure or omission
on the part of Lender to exercise the option for acceleration of maturity of the
Note and foreclosure of this Mortgage following any default as aforesaid or to
exercise any other option or remedy granted hereunder to Lender when entitled to
do so in any one or more instances, or the acceptance by Lender of partial
payment of the Loan, whether before or subsequent to Borrower's default
hereunder, shall not constitute a waiver of any such default or the right to
exercise any such option or remedy, but such option or remedy shall remain
continuously in force. Acceleration of the maturity of the Note, once claimed
hereunder by Lender, at the option of Lender, may be rescinded by written
acknowledgment to that effect by Lender, but the tender and acceptance of
partial payments alone shall not in any way either affect or rescind such
acceleration of maturity, nor act as a waiver, accord and satisfaction,
modification, novation or similar defense.

         25.      UCC REMEDIES.

                  (a)      This Mortgage constitutes a Security Agreement under
the UCC with respect to any part of the Property that may or might now or
hereafter be or be deemed to be personal property, fixtures or property other
than real estate, 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:

                           (1)      No financing statement covering any of the
         Property or any proceeds thereof is on file in any public office; and
         Borrower will, at its cost and expense, upon demand, furnish to Lender
         such further information and will execute and deliver to Lender such
         financing statements and other documents in form reasonably
         satisfactory to Lender and will do all such acts and things as Lender
         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 Property as security for the Loan,
         subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or
         desirable;

                           (2)      The terms and provisions contained in this
         section and in Section 25(b) of this Mortgage shall, unless the context
         otherwise requires, have the meanings and be construed as provided in
         the UCC;

                                                         Oklahoma City, Oklahoma

                                       28


                           (3)      This Mortgage constitutes a security
         agreement and financing statement under the UCC with respect to the
         Property. As such, this Mortgage covers any portion of the Property
         that is personal property including all items which are to become
         fixtures. Borrower is the "Debtor" and Lender is the "Secured Party"
         (as those terms are defined and used in the UCC) insofar as this
         Mortgage constitutes a financing statement.

                  (b)      Upon the occurrence of a default, Lender may exercise
its rights of enforcement with respect to the Fixtures and Personal Property
under the UCC, and in conjunction with, in addition to or in substitution for
those rights and remedies:

                           (1)      Written Notice mailed to Borrower as
         provided herein ten (10) days prior to the date of public sale of the
         Fixtures and Personal Property or prior to the date after which private
         sale of the Fixtures and Personal Property will be made shall
         constitute reasonable notice;

                           (2)      any sale made pursuant to the provisions of
         this Section shall be deemed to have been a public sale conducted in a
         commercially reasonable manner if held contemporaneously with the sale
         of the Mortgaged Property under power of sale as provided herein upon
         giving the same notice with respect to the sale of the Fixtures and
         Personal Property hereunder as is required for such sale of the
         Mortgaged Property under power of sale;

                           (3)      in the event of a foreclosure sale, whether
         made under the terms hereof, or under judgment of a court, the Fixtures
         and Personal Property and the Mortgaged Property may, at the option of
         Lender, be sold as a whole;

                           (4)      it shall not be necessary that Lender take
         possession of the Fixtures and Personal Property or any part thereof
         prior to the time that any sale pursuant to the provisions of this
         Section is conducted and it shall not be necessary that the Fixtures
         and Personal Property or any part thereof be present at the location of
         such sale;

                           (5)      prior to application of proceeds of
         disposition of the Fixtures and Personal Property to the secured
         indebtedness, such proceeds shall be applied to the reasonable expenses
         of retaking, holding, preparing for sale or lease, selling, leasing and
         the like and the Reasonable Attorneys' Fees and other legal expenses
         incurred by Lender;

                           (6)      any and all statements of fact or other
         recitals made in any bill of sale or assignment or other instrument
         evidencing any foreclosure sale hereunder as to nonpayment of the
         indebtedness or as to the occurrence of any default, or as to Lender

                                                         Oklahoma City, Oklahoma

                                       29


         having declared all of such indebtedness to be due and payable, or as
         to notice of time, place and terms of sale and of the properties to be
         sold having been duly given, or as to any other act or thing having
         been duly done by Lender, shall be taken as prima facie evidence of the
         truth of the facts so stated and recited;

                           (7)      Lender may appoint or delegate any one or
         more persons as agent to perform any act or acts necessary or incident
         to any sale held by Lender, including the sending of notices and the
         conduct of the sale, but in the name and on behalf of Lender; and

                           (8)      this Mortgage covers Goods (as defined by
         the UCC) which are or are to become Fixtures related to the Real
         Property, and covers As-Extracted Collateral related to the Real
         Property. A carbon, photographic or other reproduction of this Mortgage
         or of any financing statement relating to this Mortgage shall be
         sufficient as a financing statement. This Mortgage shall be effective
         as a financing statement filed as a fixture filing with respect to all
         fixtures included within the Property and is to be filed for record in
         the real estate records in the Office of the County Clerk where the
         Property (including said fixtures) is situated. This Mortgage shall
         also be effective as a financing statement As-Extracted Collateral with
         respect to all As-Extracted Collateral included within the Real
         Property (including, without limitation, all oil, gas, other minerals,
         and other substances of value which may be extracted from the earth and
         all accounts arising out of the sale at the wellhead or minehead
         thereof), and is to be filed for record in the real estate records of
         the county where the Property is situated. The mailing address of
         Borrower is set forth in Section 43 of this Mortgage and the address of
         Lender from which information concerning the security interest may be
         obtained is the address of Lender set forth in Section 43 of this
         Mortgage.

         26.      PROTECTION OF LENDER'S SECURITY. At any time after default
hereunder, Lender, or Lender's agents or contractors, is authorized, without
notice and in Lender's sole discretion, to enter upon and take possession of the
Property or any part thereof, and to perform any acts which Lender deems
necessary or proper to conserve the security interest herein intended to be
provided by the Property, to operate any business or businesses conducted
thereon, and to collect and receive all Rents thereof and therefrom, including
those past due as well as those accruing thereafter.

         27.      APPOINTMENT OF RECEIVER. If, at any time after a default
hereunder, Lender deems, in Lender's sole discretion, that a receivership may be
necessary to protect the Property or its Rents, whether before or after maturity
of the Note and whether before or at the time of or after the institution of
foreclosure or suit to collect the Loan or to enforce this Mortgage or any of
the other Loan Documents, Lender, as a matter of strict right and regardless of
the value of the Property or the amounts due hereunder or secured hereby, or of

                                                         Oklahoma City, Oklahoma

                                       30


the solvency of any party bound for the payment of such indebtedness, shall have
the right, upon ex parte application and without notice to anyone, and by any
court having jurisdiction, to the appointment of a receiver to take charge of,
manage, preserve, protect and operate the Property, to collect the Rents
thereof, to make all necessary and needful repairs, and to pay all taxes,
assessments, insurance premiums and other such charges against and expenses of
the Property, and to do such other acts as may by such court be authorized and
directed, and after payment of the expenses of the receivership and the
management of the Property, to apply the net proceeds of such receivership in
reduction of the Loan or in such other manner as the said court shall direct
notwithstanding the fact that the amount owing thereon may not then be due and
payable or the said Loan is otherwise adequately secured. Such receivership
shall, at the option of Lender, continue until full payment of all sums hereby
secured or until title to the Property shall have passed by sale under this
Mortgage. Borrower hereby specifically waives its right to object to the
appointment of a receiver as aforesaid, and hereby expressly agrees that such
appointment shall be made as an admitted equity and as a matter of absolute
right to Lender.

         28.      RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The
rights and remedies herein provided are cumulative, and Lender, as the holder of
the Note and of every other obligation secured hereby, may recover judgment
thereon, issue execution therefor and resort to every other right or remedy
available at law or in equity, without first exhausting any right or remedy
available to Lender and without affecting or impairing the security of any right
or remedy afforded hereby, and no enumeration of special rights or powers by any
provisions hereof shall be construed to limit any grant of general rights or
powers, or to take away or limit any and all rights granted to or vested in
Lender by law or equity. Borrower further agrees that no delay or omission on
the part of Lender to exercise any rights or powers accruing to it hereunder
shall impair any such right or power, or shall be construed to be a waiver of
any such default hereunder or an acquiescence therein; and every right, power
and remedy granted herein or by law or equity to Lender may be exercised from
time to time as often as Lender deems expedient.

         Lender may resort to any security given by this Mortgage or to any
other security now existing or hereafter given to secure the payment of the
Loan, in whole or in part, and in such portions and in such order as may seem
best to Lender in its sole discretion, and any such action shall not be
considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage. To the full extent Borrower may do so,
Borrower agrees that Borrower will not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force pertaining to
the rights and remedies of sureties or providing for any stay, extension or
redemption, and Borrower, for Borrower and Borrower's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Property, to the extent permitted by law, hereby
waives and releases all rights of redemption, stay of execution, notice of
intention to mature or declare due the whole of the

                                                         Oklahoma City, Oklahoma

                                       31


secured indebtedness, notice of election to mature or declare due the whole of
the secured indebtedness and all rights to a marshaling of the assets of
Borrower, including the Property, or to a sale in inverse order of alienation in
the event of foreclosure of the liens and security interests hereby created.
Borrower shall not have or assert any right under any statute or rule of law
pertaining to the marshaling of assets, sale in inverse order of alienation, the
exemption of homestead, the administration of estates of decedents or other
matters whatever to defeat, reduce or affect the right of Lender under the terms
of this Mortgage to a sale of the Property for the collection of the secured
indebtedness without any prior or different resort for collection, or the right
of Lender under the terms of this Mortgage to the payment of such indebtedness
out of the proceeds of sale of the Property in preference to every other
claimant whatever. If any law referred to in this Section and now in force, of
which Borrower or Borrower's heirs, devisees, representatives, successors and
assigns and such other persons claiming any interest in the Property might take
advantage despite this Section, shall hereafter be repealed or cease to be in
force, such law shall not thereafter be deemed to preclude the application of
this Section.

         29.      MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without
notice and without regard to the consideration, if any, paid therefor, and
notwithstanding the existence at that time of any inferior mortgages, deeds of
trust, or other liens thereon, may release any part of the security described
herein, or may release any person or entity liable for the Loan without in any
way affecting the priority of this Mortgage, to the full extent of the Loan
remaining unpaid hereunder, upon any part of the security not expressly
released. Lender may, at its option and within Lender's sole discretion, also
agree with any party obligated on the Loan, or having any interest in the
security described herein, to extend the time for payment of any part or all of
the Loan, and such agreement shall not, in any way, release or impair this
Mortgage, but shall extend the same as against the title of all parties having
any interest in said security, which interest is subject to this Mortgage.

         30.      PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the
Property shall be Borrower, or such other manager as may be first approved in
writing by Lender. The exclusive leasing agent of the Property, if other than
Borrower or the foregoing party, shall be first approved in writing by Lender.
The management and leasing contracts (or in the absence of any such written
contract, a letter so stating and further identifying the name of the person or
entity charged with the responsibility for managing and/or leasing the Property)
shall be subordinate to this Mortgage, and satisfactory to and subject to the
prior written approval of Lender throughout the term of the Loan. Upon default
in either of these requirements, then the whole of the Loan hereby secured
shall, at the election of Lender, become immediately due and payable, together
with any Prepayment Premium, late payment charges and all other sums required by
the Note or the other Loan Documents, and Lender shall be entitled to exercise
any or all remedies provided for or referenced in this Mortgage.

         31.      MODIFICATION NOT A WAIVER. In the event Lender (a) releases,
as aforesaid, any part of the security described herein or any person or entity
liable for the Loan;

                                                         Oklahoma City, Oklahoma

                                       32


(b) grants an extension of time for the payment of the Note; (c) takes other or
additional security for the payment of the Note; or (d) waives or fails to
exercise any rights granted herein, in the Note, or any of the other Loan
Documents, any said act or omission shall not release Borrower, subsequent
purchasers of the Property or any part thereof, or makers, sureties, endorsers
or guarantors of the Note, if any, from any obligation or any covenant of this
Mortgage, the Note or any of the other Loan Documents, nor preclude Lender from
exercising any right, power or privilege herein granted or intended to be
granted in the event of any other default then made, or any subsequent default.

         32.      TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER;
ASSUMPTION. Except as set forth in Section 38(b) hereof, without the prior
written consent of Lender, the sale, transfer, assignment or conveyance of all
or any portion of the Property, or the transfer, assignment or conveyance of a
controlling interest in Borrower or its general partner or managing member, or
any guarantor, whether voluntary or by operation of law, without the prior
written consent of Lender, shall constitute a default hereunder, and entitle
Lender, at Lender's sole option, to accelerate all sums due on the Note,
together with any Prepayment Premiums (to the extent permitted by the Laws of
the State), late payment charges or any other amounts secured hereby. Lender
may, however, elect to waive the option to accelerate granted hereunder if,
prior to any such sale, transfer, assignment or conveyance of the Property, the
following conditions shall be fully satisfied: (a) Lender acknowledges in
writing that, in Lender's sole discretion, the creditworthiness of the proposed
transferee and the ability and experience of the proposed transferee to operate
the Property are satisfactory to Lender, (b) Lender and the proposed transferee
shall enter into an agreement in writing that (i) the rate of interest payable
on the Loan shall be at such rate as Lender shall determine, (ii) the repayment
schedule as set forth in the Note shall be modified by Lender, in Lender's sole
discretion, to initiate amortization or modify the existing amortization
schedule in order to amortize the then remaining unpaid principal balance of the
Note over a period of time as determined by Lender, in Lender's sole discretion,
without a change in the maturity date of the Note, and (iii) the proposed
transferee shall assume all obligations of Borrower under the Note, this
Mortgage and the other Loan Documents in writing and an assumption fee, to be
determined by Lender in Lender's sole discretion, may be charged by Lender; (c)
Lender shall receive, for Lender's review and approval, copies of all transfer
documents; and (d) Borrower or the transferee shall pay all costs and expenses
in connection with such transfer and assumption, including, without limitation,
all fees and expenses incurred by Lender.

         Borrower, or any subsequent owner of the Property or any portion
thereof, shall do all things necessary to preserve and keep in full force and
effect its and their legal existence, franchises, rights and privileges as a
corporation, partnership or limited liability company, as the case may be, under
the laws of the State of its formation and its right to own property and
transact business in the State. It shall be a default hereunder if Borrower, or
any subsequent owner of the Property or any portion thereof, shall amend,
modify, transfer, assign or terminate the applicable governing documents for
such entity, including its partnership

                                                         Oklahoma City, Oklahoma

                                       33


agreement, certificate of partnership, operating agreement, articles of
organization, regulations, articles of incorporation or bylaws, as the case may
be (as applicable, the "GOVERNING DOCUMENTS"), of Borrower or such subsequent
owner without the prior written consent of Lender. Borrower, or such subsequent
owner of the Property, shall provide Lender with copies of any proposed
amendment to its applicable Governing Documents, so that Lender may, in Lender's
sole discretion, determine whether such amendment adversely affects Lender, the
Property or the security value thereof. Provided, however, that any amendment,
modification, transfer, assignment or termination of Borrower's applicable
Governing Documents or any other action pursuant to which the current general
partner or managing member of Borrower shall either: (i) cease to be the general
partner or managing member of Borrower; or (ii) except to the extent permitted
herein, cease to own or maintain a partnership or membership interest in
Borrower equal to or greater than its partnership or membership interest at the
time this Mortgage is executed, shall be deemed to have a material adverse
effect upon Lender and the Property, and shall be a default hereunder.

         Borrower shall not change its name or identity in any manner which may
make any financing or continuation statement filed in connection with the Loan
seriously misleading within the meaning of the UCC enacted in the State or
change its jurisdiction of organization unless Borrower shall have delivered to
Lender written notice thereof not less than 30 days before the effective date of
such change and shall have taken all action which Lender determines to be
reasonably necessary or desirable to confirm and protect Lender's security
interests and rights under this Mortgage and the perfection and priority
thereof. Borrower will not change its principal places of business unless it
shall have given Lender prior written notice of its intent to do so not less
than thirty (30) days in advance of the effective date of such change. Borrower
shall bear all costs incurred by Lender in connection with any such change
including, without limitation, Reasonable Attorney's Fees.

         In the event the ownership of the Property, or any part thereof, shall
become vested in a person or entity other than Borrower, whether with or without
the prior written consent of Lender, Lender may, without notice to Borrower,
deal with such successor or successors in interest with reference to the
Property, this Mortgage and the other Loan Documents, in the same manner and to
the same extent as with Borrower without in any way vitiating or discharging
Borrower's liability hereunder or under any of the Loan Documents. No sale,
transfer or conveyance of the Property, no forbearance on the part of Lender and
no extension of time given by Lender to Borrower for the payment of the Note
shall operate to release, discharge, modify, change or affect the original
liability of Borrower, either in whole or in part, unless expressly set forth in
writing executed by Lender. Notwithstanding anything contained herein to the
contrary, Borrower hereby waives any right it now has or may hereafter have to
require Lender to prove an impairment of its security as a condition to the
exercise of Lender's rights under this Section 32.

                                                         Oklahoma City, Oklahoma

                                       34


         A sale, transfer, assignment or conveyance within the meaning of this
Section shall be deemed to include, but not be limited to, (a) an installment
sales agreement wherein Borrower agrees to sell the Property or any part thereof
for a price to be paid in installments; (b) an agreement by Borrower leasing all
or a substantial part of the Property for other than actual occupancy by a
tenant under an Occupancy Lease or a sale, assignment or other transfer of, or
the grant of a security interest in, Borrower's right, title and interest in and
to any leases or any Rents; (c) if Borrower, any guarantor, any indemnitor, or
any general partner or managing member of Borrower, is a corporation, the
voluntary or involuntary sale, conveyance, transfer or pledge of such
corporation's stock (or the stock of any corporation directly or indirectly
controlling such corporation by operation of law or otherwise), or the creation
or issuance of new stock by which an aggregate of more than ten percent (10%) of
such corporation's stock shall be vested in a party or parties who are not now
stockholders; and (d) if Borrower, any guarantor, indemnitor, or any general
partner or managing member of Borrower, is a limited partnership, general
partnership, limited liability partnership, limited liability company, or joint
venture, the change, removal or resignation of a general partner, managing
partner, or member, or the transfer or pledge of the interest of any general
partner, managing partner, or member or any profits or proceeds relating to such
interest. Nothing in this Mortgage shall be construed to limit or restrict the
transfer of shares of Agree Realty Corporation.

         Notwithstanding anything contained in this Section 32 to the contrary,
as long as no default, or event which, with notice or the passage of time or
both, could result in a default, has occurred hereunder, under the Note or any
of the other Loan Documents, Lender shall permit one (1) bona fide arm's length
transfer of the Property to another borrowing entity without a change in the
terms of the Loan; provided, however, that no such transfer shall be valid or
permitted hereunder unless: (i) Lender receives prior Written Notice of such
proposed transfer; (ii) such proposed transferee and any substitute guarantor
has been approved in writing by Lender (taking into consideration such factors
as transferee's creditworthiness, business experience, financial condition and
managerial capabilities); (iii) the transferee's (and its sole general partner's
or managing member's) single purpose and bankruptcy remote character are
satisfactory to Lender in its sole discretion; (iv) Lender has obtained such
other legal opinions regarding substantive consolidation issues, enforceability
of the assumption documents, no adverse impact on the Securities or any REMIC
holding the Note and similar matters as Lender may require, (v) the execution
and delivery to Lender of a written assumption agreement covering the Note this
Mortage, the Borrower Cross-Default Guaranty and the other Loan Documents and/or
substitute guaranty (in Lender's sole and absolute discretion) and such
modifications to the Loan Documents executed by such parties and containing such
terms and conditions as Lender may require in its sole and absolute discretion
prior to such sale or transfer (provided that in the event the Loan is included
in a REMIC and is a performing Loan, no modification to the terms and conditions
shall be made or permitted that would cause (A) any adverse tax consequences to
the REMIC or any holders of any Mortgage-Backed Pass-Through Securities, (B)
this Mortgage to fail to be a Qualifying Security Instrument under applicable
federal law relating to REMIC's, or (C) result in a

                                                         Oklahoma City, Oklahoma

                                       35


taxation of the income from the Loan to the REMIC or cause a loss of REMIC
status), (vi) if applicable, the delivery to Lender of an endorsement (at
Borrower's sole cost and expense) to Lender's policy of title insurance then
insuring the lien created by this Mortgage in form and substance acceptable to
Lender in its sole judgment; (vii) Lender is paid a cash assumption fee in
accordance with the following schedule: Two percent (2%) of the then outstanding
principal balance of the Note if such outstanding principal balance is less than
or equal to Three Million Dollars ($3,000,000.00), one and one-half percent (1
1/2%) of the then outstanding principal balance of the Note if such outstanding
principal balance is in excess of Three Million Dollars ($3,000,000.00); (viii)
Borrower pays all fees and expenses incurred by Lender in connection with such
transfer and assumption, including, without limitation, inspection and
investigation fees, title insurance charges, and Reasonable Attorneys' Fees;
(ix) Lender approves the management agreement and leasing agreement, and the
management and leasing company to be employed by the proposed transferee; and
(x) the transferee is simultaneously purchasing each of the Properties which
secure the Affiliate Loans, to the extent such Affiliate Loans remain
outstanding. Any transfer of all or any portion of the Property which does not
strictly comply with the terms and conditions of the foregoing shall be a
default hereunder, and shall entitle Lender to exercise all rights and remedies
provided in this Mortgage and the other Loan Documents. This one-time right of
transfer shall apply to the Borrower named herein and not to any subsequent
owner of the Property.

         33.      FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the
Note remains unpaid, Borrower shall not, either voluntarily or involuntarily,
permit the Property or any part thereof to become subject to any secondary or
subordinate lien, mortgage, deed of trust, security interest or encumbrance of
any kind whatsoever without the prior written consent of Lender, and the
imposition of any such secondary lien, mortgage, deed of trust, security
interest or encumbrance without the approval of Lender shall constitute a
default hereunder, and entitle Lender, at Lender's sole option, to declare the
outstanding principal balance of the Note, all accrued and unpaid interest
thereon, Prepayment Premiums (to the extent permitted by the laws of the State,
late payment charges and any other amounts secured hereby to be and become
immediately due and payable in full. In the event that Lender shall hereafter
give its written consent to the imposition of any such secondary lien, mortgage,
deed of trust, security interest or other encumbrance upon the Property, Lender,
at Lender's sole option, shall be entitled to accelerate the maturity of the
Note and exercise any and all remedies provided and available to Lender
hereunder and in the other Loan Documents in the event that the holder of any
such secondary lien or encumbrance shall institute foreclosure or other
proceedings to enforce the same; it being understood and agreed that a default
under any instrument or document evidencing, securing or secured by any such
secondary lien or encumbrance shall be and constitute a default hereunder. In
the event all or any portion of the proceeds of the Loan are used for the
purpose of retiring debt or debts secured by prior liens on the Property, Lender
shall be subrogated to the rights and lien priority of the holder or holders of
the lien or liens so discharged.

                                                         Oklahoma City, Oklahoma

                                       36


         34.      CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Borrower agrees that
the making of any oil, gas or mineral lease, or the sale or conveyance of any
mineral interest or right to explore for minerals under, through or upon the
Property, would impair the value of the Property, and that Borrower shall have
no right, power or authority to lease the Property, or any part thereof, for
oil, gas or other mineral purposes, or to grant, assign or convey any mineral
interest of any nature, or the right to explore for oil, gas and other minerals,
without first obtaining Lender's express written permission therefor, which
permission shall not be valid until recorded among the Public Records of the
county in which the Property is located. Borrower further agrees that if
Borrower shall make, execute, or enter into any such lease or attempt to grant
any such mineral rights without such prior written permission of Lender, then
Lender shall have the option, without notice, to declare the same to be a
default hereunder, and to declare the Loan immediately due and payable in full.
Whether or not Lender shall consent to such lease or grant of mineral rights,
Lender shall receive the entire consideration to be paid for any such lease or
grant of mineral rights, with the same to be applied to the Loan notwithstanding
the fact that the amount owing thereon may not then be due and payable or that
the Loan is otherwise adequately secured; provided, however, that the acceptance
of such consideration shall in no way impair the lien of this Mortgage on the
Property or cure any existing Monetary Default.

         35.      ESTOPPEL CERTIFICATION BY BORROWER. Borrower, upon request of
Lender therefor made either personally or by mail, shall certify in writing to
Lender (or any party designated by Lender), in a form satisfactory to Lender or
such designee, the amount of principal and interest then outstanding under the
terms of the Note and any other sums due and owing under this Mortgage or any of
the other Loan Documents, and whether any offsets or defenses exist against the
Loan. Such certification shall be made by Borrower within ten (10) days if the
request is made personally, or within twenty (20) days if the request is made by
mail.

         36.      CROSS-DEFAULT. The Note is also secured by the terms,
conditions and provisions of the Assignment, by three Cross-Default Guaranty
Agreements of even date herewith from Agree - Milestone Center Project, L.L.C.,
as guarantor for the Agree-Milestone Loan; Agree - Columbia Crossing Project,
L.L.C., as guarantor for the Agree-Columbia Loan; and Omaha, respectively in
favor of Lender (hereinafter individually or collectively referred to as the
"AFFILIATED ENTITY CROSS-DEFAULT GUARANTYS") and, additionally, may be secured
by contracts or agreements of guaranty or other security instruments. The terms,
covenants, conditions and agreements of each security instrument shall be
considered a part hereof as fully as if set forth herein verbatim. Any default
under this Mortgage, any Affiliated Entity Cross-Default Guaranty or any of the
other Loan Documents shall constitute a default hereunder and under each of the
other Loan Documents. Notwithstanding the foregoing, the enforcement or
attempted enforcement of this Mortgage or any of the other Loan Documents now or
hereafter held by Lender shall not prejudice or in any manner affect the right
of Lender to enforce any other Loan Document; it being understood

                                                         Oklahoma City, Oklahoma

                                       37


and agreed that Lender shall be entitled to enforce this Mortgage and any of the
other Loan Documents now or hereafter held by it in such order and manner as
Lender, in its sole discretion, shall determine.

         37.      EXAMINATION OF BORROWER'S RECORDS. Borrower will maintain
complete and accurate books and records showing in detail the income and
expenses of the Property, and will permit Lender and its agents, contractors or
representatives to examine said books and records and all supporting vouchers
and data during normal business hours and from time to time upon request by
Lender, in such place as such books and records are customarily kept. Borrower
will furnish to Lender, within one hundred twenty (120) days after the close of
each respective fiscal period annual and quarterly financial statements (income
statements and a balance sheet) for the Borrower and the Property. Borrower will
furnish to Lender on or before 45 calendar days after the end of each calendar
quarter the following items, each certified by Borrower as being true and
correct, in such format and in such detail as Lender or its servicer may
request: (a) a written statement (rent roll) dated as of the last day of each
such calendar quarter identifying each of the Occupancy Leases by the term,
space occupied, rental required to be paid (including percentage rents and
tenant sales), security deposit paid, any rental concessions, all rent
escalations, any rents paid more than one month in advance, any special
provisions or inducements granted to tenants, any taxes, maintenance and other
common charges paid by tenants, all vacancies and identifying any defaults or
payment delinquencies thereunder; and (b) quarterly and year-to-date operating
statements prepared for each calendar quarter during each such reporting period
detailing the total revenues received, total expenses incurred, total cost of
all capital improvements, total debt service and total cash flow. These
statements shall be in form acceptable to Lender and its servicer, shall be
prepared in accordance with generally accepted accounting principles, and shall
include a rent roll, certified as true and correct by Borrower. The statements
shall show in detail all income derived from and expenses incurred in connection
with the ownership of the Property, including current annual sales figures for
all Major Tenants of the Property if required under the Major Tenant leases or
if such financial information is otherwise available. Borrower shall deliver to
Lender, for Borrower, or any entity with whom Borrower's tax return is
consolidated, copies of all income tax returns, requests for extension and other
similar items contemporaneously with its delivery of same to the Internal
Revenue Service. In the event Borrower fails to provide such statements to
Lender within the time prescribed above, Borrower shall pay Lender the sum of
$200.00 in administrative expenses for each successive month for which the
statements are delinquent (or in the case of such statements to be delivered
prior to the transfer of the Loan to Investor (hereafter defined), for each
successive week for which the statements are delinquent). Upon a default
hereunder, Lender shall have the right to require that said financial statements
be audited and certified by a certified public accountant acceptable to Lender,
at the sole cost and expense of Borrower.

                                                         Oklahoma City, Oklahoma

                                       38


         Prior to the transfer of the Loan to Investor by Lender, Borrower shall
deliver to Lender the reports required above on a monthly basis. Such reports
shall be delivered within ten calendar days after the end of each calendar
month.

         In addition, at the request of Lender, but in no case more often than
once a quarter nor more than three (3) times during the term of the Loan, unless
a default has occurred, Borrower shall furnish to Lender (i) unaudited financial
statements (balance sheet, income statement, cash flow statement and current
rent roll) covering operation of the Property for periods other than those set
forth in the preceding paragraph and (ii) unaudited financial statements
(balance sheets, income statements, and cash flow statements) for Borrower, its
general partner(s), shareholder(s) or member(s) (whichever is applicable) and
for such other principals of Borrower as designated by Lender, provided that for
so long as the Property is held by Borrower such statements shall be required
only for Borrower and Agree Realty Corporation. All such statements shall be
certified to Lender to be complete, correct, and accurate by the individual (for
an individual's statements) or by an authorized representative of the entity (if
statements are for a partnership, corporation or limited liability company).

         Any inspection or audit of the Property or the books and records of
Borrower, or the procuring of documents and financial and other information, by
or on behalf of Lender, shall be at Borrower's expense and shall be for Lender's
protection only, and shall not constitute any assumption of responsibility or
liability by Lender to Borrower or anyone else with regard to the condition,
construction, maintenance or operation of the Property, nor Lender's approval of
any certification given to Lender nor relieve Borrower of any of Borrower's
obligations.

         38.      ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED.
Borrower covenants and agrees to permit or suffer none of the following without
the prior written consent of Lender:

                  (a)      Any structural alteration of, or addition to, the
Improvements now or hereafter situated upon the Real Property, or the addition
of any new buildings or other structure(s) thereto, other than the erection or
removal of non-load bearing interior walls or as may be permitted under the
Borders Lease, so long as the Borders Lease remains in effect; or

                  (b)      The removal, transfer, sale or lease of the Property,
except that the removal, replacement or substitution of fixtures, equipment,
machinery, apparatus and articles of personal property (replacement or
substituted items must be of like or better quality than the removed items in
their original condition) encumbered hereby may be made in the normal course of
business; or

                  (c)      The use of any of the Improvements now or hereafter
situated on the Real Property for any purpose other than the Existing Use and
related facilities, or as may be permitted under the Borders Lease, so long as
the Borders Lease remains in effect.

                                                         Oklahoma City, Oklahoma

                                       39


         39.      FUTURE ADVANCES SECURED. This Mortgage shall secure not only
existing indebtedness, but also future advances, whether such advances are
obligatory or to be made at the option of Lender. Upon the request of Borrower,
and at Lender's option prior to release of this Mortgage, Lender may make future
advances to Borrower. All future advances with interest thereon shall be secured
by this Mortgage to the same extent as if such future advances were made on the
date of the execution of this Mortgage unless the parties shall agree otherwise
in writing, but the total secured indebtedness shall not exceed at any one time
a maximum principal amount equal to double the face amount of the Note plus
interest and costs of collection, including court costs and Reasonable
Attorneys' Fees. Any advances or disbursements made for the benefit or
protection of or the payment of taxes, assessments, levies or insurance upon the
Property, with interest on such disbursements as provided herein, shall be added
to the principal balance of the Note and collected as a part thereof. To the
extent that this Mortgage may secure more than one note, a default in the
payment of any such mortgage note shall constitute a default in the payment of
all such notes.

         40.      EFFECT OF SECURITY AGREEMENT. Borrower agrees to, and shall
upon the request of Lender, execute and deliver to Lender, in form and content
satisfactory to Lender, such financing statements, descriptions of property and
such further assurances as Lender, in Lender's sole discretion, may from time to
time consider necessary to create, perfect, continue and preserve the lien and
encumbrances hereof, and the security interest granted herein, upon and in the
Property. Without the prior written consent of Lender, Borrower shall not create
or suffer to be created, pursuant to the UCC, any other security interest in
such real and personal property and fixtures described herein. Upon the
occurrence of a default hereunder or Borrower's breach of any other covenants or
agreements between the parties entered into in conjunction herewith, Lender
shall have the remedies of a secured party under the UCC as provided in Section
25, and at Lender's option, the remedies provided for in this Mortgage and the
other Loan Documents. Lender, at the expense of Borrower, may cause such
statements, descriptions and assurances, as herein provided in this Section 40,
and this Mortgage, to be recorded and re-recorded, filed and refiled, at such
times and in such places as may be required or permitted by law to so create,
perfect and preserve the lien and encumbrance hereof upon all of the Property.

         41.      TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions
of the Application for Mortgage Loan dated August 28, 2003, and any subsequent
amendments thereto (the "APPLICATION"), executed by and between Borrower and
Lender, are incorporated herein by reference. All terms, covenants, conditions
and agreements of the Application not expressly set forth in this Mortgage and
any of the other Loan Documents shall survive the execution and delivery hereof,
and remain in full force and effect. In the event any conflict exists between
the terms, covenants, conditions and agreements of the Application and the Loan
Documents, the terms, covenants, conditions and agreements of the Loan Documents
shall prevail.

                                                         Oklahoma City, Oklahoma

                                       40


         42.      SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof
shall be binding upon Borrower and the heirs, personal representatives,
trustees, successors and assigns of Borrower, and shall inure to the benefit of
Lender, its successors and assigns. Where more than one Borrower is named
herein, the obligations and liabilities of said Borrower shall be joint and
several.

         Wherever used in this Mortgage, unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein: (a) the word
"Borrower" shall mean Borrower and/or any subsequent owner or owners of the
Property; (b) the word "Lender" shall mean Lender or any subsequent holder or
holders of this Mortgage; (c) the word "Note" shall mean the Note(s) secured by
this Mortgage; and (d) the word "person" shall mean an individual, trustee,
trust, corporation, partnership, limited liability corporation, limited
liability partnership, joint venture or unincorporated association. As used
herein, the phrase "Reasonable Attorneys' Fees" shall mean fees charged by
attorneys selected by Lender based upon such attorneys' then prevailing hourly
rates as opposed to any statutory presumption specified by any statute then in
effect in the State. As used herein words of any gender shall include all other
genders.

         43.      NOTICES. All notices, reports, requests or other written
instruments required or permitted hereunder, shall be in writing, signed by the
party giving or making the same, and shall be sent hand-delivered, effective
upon receipt, sent by United States Express Mail or by a nationally recognized
overnight courier, effective upon receipt, or sent by United States registered
or certified mail, postage prepaid, with return receipt requested, deemed
effective on the earlier of the day of actual delivery as shown by the
addressee's return receipt or the expiration of three business days after the
date of mailing, addressed to the party intended to receive the same at the
address set forth below or at such other address as shall be given in writing by
any party to another ("WRITTEN NOTICE"):

         If to Borrower:       OKLAHOMA CITY STORE NO. 151 L.L.C.
                               31850 Northwestern Highway
                               Farmington Hills, Michigan 48334
                               Attention: Mr. Richard Agree

         If to Lender:         NATIONWIDE LIFE INSURANCE COMPANY
                               One Nationwide Plaza
                               Columbus, Ohio  43215-2220
                               Attention: Real Estate Investment Department, 34T

         44.      GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. BORROWER
AND LENDER, EACH TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND

                                                         Oklahoma City, Oklahoma

                                       41


VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES
AND FOREVER FORGOES HEREBY THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, AGAINST THE OTHER,
ITS SUCCESSORS AND ASSIGNS, BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
TO OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS, THE LOAN OR ANY COURSE OF
CONDUCT, ACT, OMISSION, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EITHER PARTY'S
DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY
OTHER PERSONS AFFILIATED WITH EITHER), IN CONNECTION WITH THE LOAN OR THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, IN ANY COUNTERCLAIM WHICH ANY PARTY
MAY BE PERMITTED TO ASSERT THEREUNDER, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. IN NO EVENT SHALL LENDER, ITS SUCCESSORS OR ASSIGNS BE LIABLE FOR ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING
WITHOUT LIMITATION LOSS OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION
HEREOF, BORROWER WAIVES ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This
Mortgage and the rights and obligations of the parties hereunder shall be
governed by, and construed in accordance with, the internal laws of the State,
without regard to principles of conflicts of laws. The parties hereto
irrevocably (a) agree that any suit, action or other legal proceeding arising
out of or relating to this Mortgage may be brought in a court of record in the
State or in the courts of the United States of America located in such State,
(b) consent to the non-exclusive jurisdiction of each such court in any suit,
action or proceeding, and (c) waive any objection which it may have to the
laying of venue of any such suit, action or proceeding in any of such courts and
any claim that any such suit, action or proceeding has been brought in an
inconvenient forum. If any clauses or provisions herein contained operate, or
would prospectively operate, to invalidate this Mortgage, then such clauses or
provisions only shall be held for naught, as though not herein contained, and
the remainder of this Mortgage shall remain operative and in full force and
effect.

         45.      RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising
under the terms, covenants, conditions and agreements contained in this Mortgage
shall be separate, distinct and cumulative, and none of them shall be in
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provisions,
anything herein or otherwise to the contrary notwithstanding. If Borrower is
comprised of more than one person or entity, then the liability of each such
person and entity hereunder shall be joint and several.

         46.      MODIFICATIONS. This Mortgage cannot be changed, altered,
amended or modified except by an agreement in writing and in recordable form,
executed by both Borrower and Lender.

                                                         Oklahoma City, Oklahoma

                                       42


         47.      EXCULPATION. Notwithstanding anything contained herein to the
contrary, the liability of Borrower is subject to the limited recourse
provisions contained in the Exculpation section of the Note, which are
incorporated herein and made a part hereof by reference as if fully set forth
herein.

         48.      FULL RECOURSE. Notwithstanding any provisions in this Mortgage
to the contrary, including without limitation the provisions set forth in the
section captioned "Exculpation" hereinabove, Borrower shall be personally
liable, jointly and severally, for the entire Loan secured by this Mortgage
(including all principal, interest and other charges) in the event (a) Borrower
violates the covenant governing the placing of subordinate financing on the
Property as set forth in this Mortgage; (b) Borrower violates the covenant
restricting transfers of interests in the Property or transfers of ownership
interests in Borrower as set forth in this Mortgage; or (c) Borrower or any
guarantor violates the provisions of Section 22 of this Mortgage, or there is
filed against Borrower or any guarantor or indemnitor of the Loan, a petition in
bankruptcy or for the appointment of a receiver, or there commences under any
bankruptcy or insolvency law, proceedings for Borrower's relief, or for the
compromise, extension, arrangement or adjustment of Borrower's obligations which
is not dismissed within thirty (30) days after the filing of same.

         49.      LENDER IS NOT A JOINT VENTURER OR PARTNER. Borrower and Lender
acknowledge and agree that in no event shall Lender be deemed to be a partner or
joint venturer with Borrower or any member of Borrower. Without limitation of
the foregoing, Lender shall not be deemed to be a partner or joint venturer on
account of its becoming a mortgagee in possession or exercising any rights
pursuant to this Mortgage or pursuant to any other instrument or document
evidencing or securing any of the indebtedness secured hereby, or otherwise.

         50.      CAPTIONS. The captions set forth at the beginning of the
various Sections of this Mortgage are for convenience only, and shall not be
used to interpret or construe the provisions of this Mortgage.

         51.      SPLITTING OF MORTGAGE. This Mortgage and the Note shall, at
any time until the same shall be fully paid and satisfied, at the sole election
of Lender, be split or divided into two or more notes and two or more security
instruments, each of which shall cover all or a portion of the Property to be
more particularly described therein. To that end, Borrower, upon written request
of Lender, shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered by the then owner of the Property, to Lender and/or
its designee or designees substitute notes and security instruments in such
principal amounts, aggregating not more than the then unpaid principal amount of
Loan, and containing terms, provisions and clauses similar to those contained
herein and in the Note, and such other documents and instruments as may be
required by Lender.

                                                         Oklahoma City, Oklahoma

                                       43


         52.      REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any other Loan Document which is not of public record, and, in the case of
any such mutilation, upon surrender and cancellation of such Note or other Loan
Document, Borrower, at its expense, will issue, in lieu thereof, a replacement
Note or other Loan Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Loan Document in the same principal amount thereof and
otherwise of like tenor.

         53.      SOLE DISCRETION OF LENDER. Wherever pursuant to this Mortgage
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide that arrangements or terms are satisfactory
or not satisfactory shall be in the sole discretion of Lender and shall be final
and conclusive, except as may be otherwise expressly and specifically provided
herein.

         54.      TRANSFER OF LOAN.

                  (a)      Lender may, at any time, sell, transfer or assign the
Note, this Mortgage, the Assignment and the other Loan Documents, and any or all
servicing rights with respect thereto, or grant participations therein or issue
mortgage pass-through certificates or other securities evidencing a beneficial
interest in a rated or unrated public offering or private placement (the
"SECURITIES"), or otherwise sell the Loan or an interest therein (a "SECONDARY
MARKET TRANSACTION"). Lender may forward to each purchaser, transferee,
assignee, servicer, participant, investor in such Securities or in connection
with a Secondary Market Transaction or any Rating Agency rating such Securities
(collectively, the "INVESTOR") and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan
and to Borrower, any Guarantor and the Property, whether furnished by Borrower,
any Guarantor or otherwise, as Lender determines necessary or desirable.
Borrower acknowledges that certain information regarding the Loan and the
parties thereto and the Property may be included in a private placement
memorandum, prospectus or other disclosure documents. The term "RATING AGENCY"
shall mean each statistical rating agency that has assigned a rating to the
Securities.

                  (b)      Borrower shall cooperate in good faith with Lender in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements reasonably imposed by the participants
involved in any Secondary Market Transaction (including without limitation, a
Rating Agency and/or an Investor) including, without limitation, all structural
or other changes to the Loan, modifications to any documents evidencing or
securing the Loan, delivery of opinions of counsel acceptable to the Rating
Agency or such Investors and addressing such matters as the Rating Agency or
such Investors may require; provided, however, that the Borrower shall not be
required to modify any documents evidencing or securing the Loan which would
modify (i) the interest rate payable

                                                         Oklahoma City, Oklahoma

                                       44


under the Note, (ii) the stated maturity of the Note, (iii) the amortization of
principal of the Note, or (iv) any other material terms or covenants of the
Loan.

                  (c)      If Securities are issued in connection with the Loan
or a Secondary Market Transaction occurs with respect to the Loan, all Funds
held by Lender in escrow or pursuant to reserves in accordance with the Loan
Documents shall be deposited in "eligible accounts" at "eligible institutions"
and invested in "permitted investments" as then defined and required by any
Rating Agency.

         55.      COUNTERPARTS. This Mortgage may be executed in several
counterparts each of which when executed and delivered is an original, but all
of which together shall constitute one instrument.

         56.      SPECIAL STATE OF OKLAHOMA PROVISIONS. The terms and provisions
of this Section 56 control and supersede any other conflicting terms and
provisions contained in this Mortgage.

                                     NOTICE

A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW THE
MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A
FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE.

                  (a)      REMEDIES. If a default shall have occurred, Lender
shall have the following rights and remedies, which shall be in addition to and
not in limitation of any other rights and remedies set forth in this Mortgage:

                           (1)      POWER OF SALE. Lender may elect to use the
         non-judicial Power of Sale which is hereby conferred under the terms of
         this Mortgage. Such Power of Sale shall be exercised by giving Borrower
         Notice of Intent to Foreclose by Power of Sale and setting forth among
         other things, the nature of the breach(es) or default(s) and the action
         required to effect a cure thereof and the time period within which such
         cure may be effected all in compliance with Title 46 Oklahoma Statutes
         Sections 40 et seq., Oklahoma Power of Sale Mortgage Foreclosure Act
         (the "ACT"), as the same may be amended from time to time or other
         applicable statutory authority. If no cure is effected within the
         statutory time limits, the Lender may accelerate the Indebtedness
         without further notice (the Act's cure period shall run concurrently
         with any contractual provision for notice and/or cure period before
         acceleration of the Indebtedness) and may then proceed in the manner
         and subject to the conditions of the Act to send to Borrower and other
         necessary parties a Notice of Sale and to sell and convey the Real

                                                         Oklahoma City, Oklahoma

                                       45


         Property in accordance with the Act. The sale shall be made at one or
         more sales, as an entirety or in parcels, upon such notice, at such
         time and places, subject to all conditions and with the proceeds
         thereof to be applied all as provided in the Act. No action of Lender
         based upon the provisions contained herein or contained in the Act,
         including, without limitation, the giving of the Notice of Intent to
         Foreclose by Power of Sale or the Notice of Sale, shall constitute an
         election of remedies which would preclude Lender from pursuing judicial
         foreclosure before or at any time after commencement of the power of
         sale foreclosure procedure.

                           (2)      JUDICIAL FORECLOSURE. Whether or not
         proceedings have commenced by the exercise of the Power of Sale above
         given, Lender in lieu of proceeding with the power of sale may at its
         option declare the whole amount of the secured indebtedness remaining
         unpaid, immediately due and payable without notice, and proceed by suit
         or suits in equity or at law to foreclose this Mortgage. The Real
         Property may be sold as one parcel or in such parcels as the Lender may
         elect unless otherwise provided by law.

                           (3)      APPOINTMENT OF RECEIVER. Without regard to
         Lender's election of non-judicial Power of Sale foreclosure or judicial
         foreclosure, Lender shall be entitled to the appointment of a receiver
         by any court of competent jurisdiction, without notice and without
         regard to the sufficiency or value of any security for the secured
         indebtedness or the solvency of any party bound for its payment. The
         receiver shall have all of the rights and powers permitted under the
         laws of the state within which the Real Property is located.

                  (b)      WAIVER OF APPRAISEMENT. Notwithstanding anything to
the contrary contained in this Mortgage, if the Lender elects to foreclose this
Mortgage by judicial proceedings, appraisement of the Real Property is waived or
not waived at the option of the Lender and such option can be exercised at or
prior to the time judgment is rendered in any judicial foreclosure hereof.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                                         Oklahoma City, Oklahoma

                                       46


         IN WITNESS WHEREOF, Borrower has caused this Mortgage to be executed as
of the day and year first above written.

                                            BORROWER:

                                            OKLAHOMA CITY STORE NO. 151 L.L.C.,
                                            a Delaware limited liability company

                                            By: AGREE LIMITED PARTNERSHIP,
                                                a Delaware limited partnership
                                                Its Member

                                                By:  AGREE REALTY CORPORATION,
                                                     a Maryland corporation
                                                     Its General Partner

                                                     By: /s/ Richard Agree
                                                         ----------------------
                                                            Richard Agree
                                                            President

STATE OF                           )
                                   )
COUNTY OF                          )

         This instrument was acknowledged before me on October _____, 2003, by
RICHARD AGREE, President of Agree Realty Corporation, a Maryland corporation, as
general partner of Agree Limited Partnership, a Delaware partnership, as member
of Oklahoma City Store No. 151 L.L.C., a Delaware limited liability company.

                                            ------------------------------------
                                            Name:
                                                  ------------------------------
                                            Notary Public
                                            My Commission Expires:
                                                                   -------------
                                            Commission No.
                                                           ---------------------
                                            (SEAL)

                                                         Oklahoma City, Oklahoma

                                      S-1



                                    EXHIBIT A
                               (Legal Description)

SITUATED IN THE CITY OF OKLAHOMA, COUNTY OF OKLAHOMA, STATE OF OKLAHOMA:

A part of Block Five (5), UNITED FOUNDERS LIFE PLAZA, in the East Half (E/2) of
Section Twelve (12), Township Twelve (12) North, Range Four (4) West of the
Indian Meridian, Oklahoma County, Oklahoma, more particularly described as
follows, to-wit:

COMMENCING at the Northeast Corner of said Block 5, UNITED FOUNDERS LIFE PLAZA
in the East Half (E/2) of Section 12, Township 12 North, Range 4 West; Thence
South 0(degree)07'26" West along the East line of said Block 5 a distance of
430.00 feet to the point of place of beginning; Thence North 89(degree)52'34"
West a distance of 354.03 feet; Thence South 0(degree)07'26" West along a line
354.03 feet West of and parallel to the East line of said Block 5 a distance of
177.45 feet; Thence along a curve to the left having a radius of 150.00 feet a
distance of 117.81 feet and whose chord has a bearing of South 22(degree)22'34"
East and a length of 114.81 feet; Thence South 44(degree)52'34" East a distance
of 52.86 feet; Thence along a curve to the right having a radius of 79.87 feet a
distance of 101.77 feet to a point on the North Right-of-Way line of Northwest
Highway, said curve has a chord bearing South 08(degree)22'27" East and a length
of 95.03 feet; Thence South 61 (degree)52'20" East along said North Right-of-Way
Line a distance of 230.65 feet; Thence continuing along Northwest Highway
Right-of-Way South 28(degree)07'40" West a distance of 31.44 feet; Thence South
61 (degree)40'56" East a distance of 37.42 feet; Thence along a curve to the
left having a radius of 25.00 feet a distance of 51.57 feet, said curve has a
chord bearing of North 59(degree)13'15" East and a length of 42.90 feet; Thence
North 0(degree)07'26" East along the East line of said Block 5 a distance of
546.58 feet to the point or place of beginning.

TOGETHER WITH Reciprocal Easement Agreement ("REA") between Marriott Corporation
and Northwest Investors, Ltd. as recorded in Book 5053, Page 610; Assignment in
favor of Mutual Benefit Oklahoma City Marriott Associates Limited Partnership
recorded in Book 5414, Page 12; Assignment of Reciprocal Easement Agreement in
favor of HMH Properties, Inc., recorded in Book 6895, Page 1511; and First
Amendment to Reciprocal Easement Agreement recorded in Book 6972, Page 946
across part of Block 5 United Founders Life Plaza a re-plat of "Capitol Gate
Shopping Center" a part of the E % of Section 12, T12N, R4W of the I.M.,
Oklahoma City, Oklahoma County, Oklahoma more particularly described as follows:

                                                         Oklahoma City, Oklahoma

                               Exhibit A - Page 1



A 61'-4" reciprocal easement for roadway purposes lying 30'-8" on either side of
the following described centerline:

Commencing at the N.E. corner of said Block 5 United Founders Life Plaza; Thence
S00(degree)07'26"W along the East line of said Block 5 a distance of 240.00
feet; Thence N89(degree)52'34"W a distance of 354.03 feet to the point or place
of beginning; Thence S00(degree)07'26"W a distance of 367.45 feet; Thence along
the arc of a curve to the left having a radius of 150.00 feet a distance of
117.81 feet and whose chord has a bearing of S22(degree)22'34"E and a length of
114.81 feet; Thence S44(degree)52'34"E a distance of 52.65 feet; Thence along
the arc of a curve to the right having a radius of 80.00 feet a distance of 1
01.93 feet to a point on the North R/W line of Northwest Highway, said curve has
chord bearing of S08(degree)22'27"E and a length of 95.18 feet.

                                                         Oklahoma City, Oklahoma

                               Exhibit A - Page 2

EX-10.36

Recorded at the Request of and                                     EXHIBIT 10.36
When Recorded Return to:

Pepe & Hazard LLP
225 Asylum Street - 22nd Floor
Hartford, CT  06103-4302
Attention:  Adam F. Zweifler, Esq.

                      DEED OF TRUST AND SECURITY AGREEMENT

         This DEED OF TRUST AND SECURITY AGREEMENT (the "MORTGAGE") is dated as
of the _____ day of October, 2003, by OMAHA STORE NO. 166 L.L.C., a Delaware
limited liability company ("BORROWER"), having its principal office at 31850
Northwestern Highway, Farmington Hills, Michigan 48334 to and in favor of
FIDELITY NATIONAL TITLE INSURANCE COMPANY, a California corporation, having an
address at 1901 North Roselle Road, Suite 650, Schaumberg, Illinois 60195 (the
"TRUSTEE"), as trustee for NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, its successors and assigns ("LENDER"), having its principal office
at One Nationwide Plaza, Columbus, Ohio 43215-2220, Attention: Real Estate
Investment Department, 34T, or at such other place as Lender may from time to
time designate.

                              W I T N E S S E T H:

                  WHEREAS, Lender has made four loans of even date herewith in
the aggregate total original principal amount of Fifteen Million Dollars
($15,000,000.00) (the "AGGREGATE LOAN"). The Aggregate Loan is comprised of the
following loans of even date herewith: a loan from Lender to Borrower in the
original principal amount of $3,910,000.00 (this "LOAN"); a loan to ACMP
Germantown LLC, a Delaware limited liability company ("AGREE-MILESTONE"), in the
original principal amount of $3,310,000.00 (the "AGREE-MILESTONE LOAN"); a loan
to ACCP Maryland LLC, a Delaware limited liability company ("AGREE-COLUMBIA") in
the original principal amount of $3,520,000.00 (the "AGREE-COLUMBIA LOAN"); and
a loan to Oklahoma City Store No. 151 L.L.C., a Delaware limited liability
company ("OKLAHOMA CITY"), in the original principal amount of $4,260,000.00
(the "OKLAHOMA CITY LOAN") Agree-Milestone, Agree-Columbia and Oklahoma City are
hereinafter referred to collectively as the "AFFILIATED BORROWERS". The
Agree-Milestone Loan, the Agree-Columbia Loan and the Oklahoma City Loan are
hereinafter referred to generically as an "AFFILIATE LOAN" and collectively as
the "AFFILIATE LOANS";

                                                                 Omaha, Nebraska



         WHEREAS, Borrower is justly indebted to Lender in the original
principal sum of Three Million Nine Hundred Ten Thousand and 00/100 Dollars
($3,910,000.00) with interest thereon, which Loan is evidenced and represented
by that certain Note of even date herewith (the "NOTE"), both principal and
interest being payable as therein provided, with the first payment on the Note
becoming due and payable on the date of disbursement and the term "Note" shall
include all other notes given in substitution, modification, increase, renewal
or extension of the original Note described herein, in whole or in part;

         WHEREAS Borrower has guaranteed the payment and performance of the
obligations of the Affiliated Borrowers with respect to the Affiliate Loans
pursuant to the terms of that certain Cross-Default Guaranty Agreement of even
date herewith from Borrower, as guarantor, to Lender (the "BORROWER
CROSS-DEFAULT GUARANTY"); and

         WHEREAS, Lender, as a condition precedent to the extension of credit
and the making of the Loan has required that Borrower provide Lender with
security for the repayment of the Loan as well as for the performance,
observance and discharge by Borrower of various terms, covenants, conditions and
agreements made by Borrower to, with, in favor of and for the benefit of Lender
with respect to the Loan and such security;

         NOW THEREFORE, in consideration of and in order to secure the repayment
of the Loan evidenced and represented by the Note, together with interest on the
Loan, as well as the payment of all other sums of money secured hereby, as
hereinafter provided; to secure the observance, performance and discharge by
Borrower of all terms, covenants, conditions and agreements set forth in the
Note, this Mortgage and in the other Loan Documents (hereafter defined); in
order to charge the properties, interests and rights hereinafter described with
such payment, observance, performance and discharge; and in consideration of the
sum of one dollar paid by Lender to Borrower, and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged by
Borrower, Borrower does hereby grant, bargain, sell, convey, assign, transfer,
pledge, deliver, hypothecate, warrant and confirm unto Trustee, in trust, with
POWER OF SALE for the benefit of Lender forever, all of Borrower's right, title
and interest in and to the following described properties, including all rights,
interests, replacements, substitutions and additions thereto, therein or
therefore (collectively, the "MORTGAGED PROPERTY"):

         (i)      All that certain piece, parcel or tract of land or real
property of which Borrower is now seized and in actual or constructive
possession, situated in the City of Omaha, County of Douglas, and State of
Nebraska (the "STATE"), and being more particularly described on EXHIBIT A
attached hereto and by this reference made a part hereof (the "REAL PROPERTY");

         (ii)     All buildings, structures and other improvements of any kind,
nature or description now or hereafter erected, constructed, placed or located
upon the Real Property

                                                                 Omaha, Nebraska

                                       2


(the "IMPROVEMENTS"), including, without limitation, any and all additions to,
substitutions for or replacements of such Improvements;

         (iii)    All minerals, royalties, gas rights, water, water rights,
water stock, flowers, shrubs, lawn plants, crops, trees, timber and other
emblements now or hereafter located on, under or above all or any part of the
Real Property;

         (iv)     All and singular, the tenements, hereditaments, strips and
gores, rights-of-way, easements, privileges, profits and other appurtenances now
or hereafter belonging or in any way appertaining to the Real Property,
including, without limitation, all right, title and interest of the Borrower in
any after-acquired right, title, interest, remainder or reversion in and to the
beds of any ways, streets, avenues, roads, alleys, passages and public places,
open or proposed, in front of, running through, adjoining or adjacent to the
Real Property (the "APPURTENANCES");

         (v)      Any and all leases, licenses, contracts, rents, license fees,
royalties, issues, revenues, profits, proceeds, deposits, income and other
benefits, including accounts receivable, termination fees, of, accruing to or
derived from the Real Property, Improvements and Appurtenances, and any business
or enterprise presently situated or hereafter operated thereon and therewith and
all of Borrower's right, title and interest under any and all lease guaranties,
letters of credit, and any other credit support furnished to Borrower in
connection with any of the foregoing (the "RENTS");

         (vi)     Any and all awards, payments or settlements, including
interest thereon, and the right to receive the same, as a result of: (a) the
exercise of the right of eminent domain; (b) the alteration of the grade of any
way, street, avenue, road, alley, passage or public place; (c) any other injury,
damage, casualty or claim relating to the taking of, or decrease in the value
of, the Real Property, Improvements or Appurtenances; or (d) proceeds of
insurance awards, to the extent of all amounts which may be secured by this
Mortgage at the date of any such award or payment including but not limited to
Reasonable Attorneys' Fees (as hereinafter defined), costs and disbursements
incurred by Lender in connection with the collection of such award or payment;

         (vii)    All fixtures, materials, equipment, machinery, apparatus,
appliances, and other property whatsoever now or hereafter attached to,
installed in, or used in connection with the buildings and other improvements
now erected or hereafter to be erected on said land, including, but not limited
to, furnaces, steam boilers, hot-water boilers, oil burners, pipes, radiators,
air-conditioning and sprinkler systems, gas and electric fixtures, carpets,
rugs, shades, awnings, screens, elevators, motors, dynamos, cabinets and all
other furnishings, tools, equipment and machinery, appliances, building
supplies, materials, and all fixtures, accessions and appurtenances thereto, and
all renewals or replacements of or substitutions for any of the foregoing, all
of which property and things are hereby declared to be permanent

                                                                 Omaha, Nebraska

                                       3


fixtures and accessions to the freehold and part of the realty conveyed herein
as security for the indebtedness herein mentioned; and

         (viii)   All agreements or contracts relating to any interest rate cap
agreements, swaps or other interest hedging agreements;

         TO HAVE AND TO HOLD the foregoing Mortgaged Property and the rights
hereby granted for its use and benefit unto Lender, Trustee and its successors
and assigns in fee simple forever, successors in interest of Trustee, in trust,
in fee simple forever. In order to secure the repayment of the Loan evidenced
and represented by the Note, together with interest on the Loan, as well as the
payment of all other sums of money secured hereby including, without limitation,
the obligations of Borrower under the Borrower Cross-Default Guaranty, as
hereinafter provided; and to secure the observance, performance and discharge by
Borrower of all covenants, conditions and agreements set forth in the Note, this
Mortgage, the Borrower Cross-Default Guaranty and in the other Loan Documents;
and in order to charge the properties, interests and rights hereinafter
described with such payment, observance, performance and discharge; and in
consideration of the sum of Ten Dollars ($10.00) paid by Lender and other good
and valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, Borrower hereby grants to Trustee with POWER OF SALE, for the
benefit of Lender, as beneficiary, all of Borrower's right, title and interest
in and to a security interest in all Fixtures, Goods (including, without
limitation, Consumer Goods, Inventory, Equipment and Farm Products), Accounts,
Chattel Paper (including, without limitation, Electronic Chattel Paper and
Tangible Chattel Paper), Instruments, General Intangibles (including, without
limitation, Payment Intangibles and Software), Letters of Credit,
Letter-of-Credit Rights, Documents, As-Extracted Collateral, Money and Deposit
Accounts of every kind, and all proceeds thereof, including, without limitation,
any and all licenses, permits, franchises, trademarks, trade names, service
marks or logos, plans, specifications, maps, construction contracts,
instruments, insurance policies, fittings and fixtures of every kind, which is,
are or shall hereafter be located upon, attached, affixed to or used or useful,
either directly or indirectly, in connection with the complete and comfortable
use, occupancy and operation of the Real Property, Improvements or Appurtenances
as a retail project (the "EXISTING USE"), or any other business, enterprise or
operation as may hereafter be conducted upon or with said Real Property,
Improvements or Appurtenances, including, without limitation, any and all
licenses, permits or franchises, used or required in connection with such use,
occupancy or operation as well as the proceeds thereof or therefrom regardless
of form, all security deposits and advance rentals under lease agreements now or
at any time hereafter covering or affecting any of the Property and held by or
for the benefit of Borrower, all monetary deposits which Borrower has been
required to give to any public or private utility with respect to utility
services furnished to the Real Property or Improvements, all rents, issues and
profits from leases of all or any part of the Real Property or Improvements, all
proceeds (including premium refunds) of each policy of insurance relating to the
Real Property or Improvements, all proceeds from the taking of the Real Property
or Improvements or any part

                                                                 Omaha, Nebraska

                                       4


thereof or any interest therein or right or estate appurtenant thereto by
eminent domain or by purchase in lieu thereof, all amounts deposited in escrow
for the payment of ad valorem taxes, assessments, charges, ground rentals and/or
premiums for policies of insurance with respect to the Real Property or
Improvements, all proceeds and other amounts paid or owing to Borrower under or
pursuant to any and all contracts and bonds relating to the construction,
erection or renovation of the Real Property or Improvements, all oil, gas and
other hydrocarbons and other minerals produced from or allocated to the Real
Property and all products processed or obtained therefrom, the proceeds thereof,
and all accounts and general intangibles under which such proceeds may arise,
together with any sums of money that may now or at any time hereafter become due
and payable to Borrower by virtue of any and all royalties, overriding
royalties, bonuses, delay rentals and any other amount of any kind or character
arising under any and all present and future oil, gas and mining leases covering
the Real Property or any part thereof (collectively, the "FIXTURES AND PERSONAL
PROPERTY," which term expressly excludes any toxic waste or substance deemed
hazardous under federal, regional, state or local laws, codes, ordinances,
statutes, rules, regulations, decisions or orders). The Mortgaged Property and
the Fixtures and Personal Property are herein together referred to as the
"PROPERTY".

         Except as otherwise expressly provided in this Mortgage, all terms in
this Mortgage relating to the Property and the grant of the foregoing security
interest which are defined in the Uniform Commercial Code of the State (the
"UCC") shall have the meanings assigned to them in Article 9 (or, absent
definition in Article 9, in any other Article) of the UCC, as those meanings may
be amended, revised or replaced from time to time. Notwithstanding the
foregoing, the parties intend that the terms used herein which are defined in
the UCC have, at all times, the broadest and most inclusive meanings possible.
Accordingly, if the UCC shall in the future be amended or held by a court to
define any term used herein more broadly or inclusively than the UCC in effect
on the date of this Mortgage, then such term, as used herein, shall be given
such broadened meaning. If the UCC shall in the future be amended or held by a
court to define any term used herein more narrowly, or less inclusively, than
the UCC in effect on the date of this Mortgage, such amendment or holding shall
be disregarded in defining terms used in this Mortgage.

         Borrower hereby covenants and warrants with and to Lender that Borrower
is indefeasibly seized of the Property and has good right, full power, and
lawful authority to convey and encumber all of the same as aforesaid; that
Borrower hereby fully warrants the title to the Property and will defend the
same and the validity and priority of the lien and encumbrance of this Mortgage
against the lawful claims of all persons whomsoever; and Borrower further
warrants that the Property is free and clear of all liens and encumbrances of
any kind, nature or description, save and except only (with respect to said Real
Property, Improvements and Appurtenances) for real property taxes for years
subsequent to 2003 (which are not yet due and payable) and those exceptions
accepted by Lender as set forth in the title insurance commitment or proforma
policy issued to Lender precedent to the issuance of a

                                                                 Omaha, Nebraska

                                       5


Lender's Policy of Title Insurance insuring the first lien priority of this
Mortgage (the "PERMITTED EXCEPTIONS").

         If Borrower shall pay to Lender the Loan evidenced by the Note, and if
Borrower shall duly, promptly and fully perform, discharge, execute, effect,
complete and comply with and abide by each and every one of the terms,
covenants, conditions and agreements of the Note, this Mortgage, the Borrower
Cross-Default Guaranty and all other Loan Documents, then this Mortgage and the
estates and interests hereby granted and created shall cease, terminate and be
null and void, and shall be discharged of record at the expense of Borrower.

         Borrower, for the benefit of Lender and its successors and assigns,
does hereby expressly covenant and agree as follows:

         1.       PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall pay the
principal of the Loan evidenced by the Note, together with all interest thereon,
in accordance with the terms, covenants and conditions of the Note, and perform
all obligations of Borrower under the Borrower Cross-Default Guaranty promptly
at the times, at the place and in the manner that said principal and interest
shall become due, and shall promptly and punctually pay all other sums required
to be paid by Borrower pursuant to the terms, covenants and conditions of the
Note, this Mortgage, the Borrower Cross-Default Guaranty, the Assignment of
Leases, Rents and Profits of even date herewith (the "ASSIGNMENT") and all other
documents and instruments executed as further evidence of, as additional
security for or executed in connection with the Loan evidenced by the Note
(collectively, the "LOAN DOCUMENTS").

         2.       PERFORMANCE OF OTHER OBLIGATIONS. Borrower shall perform,
comply with and abide by each and every one of the terms, covenants, conditions
and agreements contained and set forth in the Note, this Mortgage, and the other
Loan Documents, shall comply with all Laws, (hereafter defined) and shall
perform all of its obligations under any term, covenant, condition, restriction
or agreement of record affecting the Property, and to insure that at all times
the Property constitutes one or more legal lots capable of being conveyed
without violation of any subdivision or platting laws, codes, ordinances,
statutes, rules, regulations, or other laws relating to the division, separation
or subdivision of real property.

         3.       PRESERVATION AND MAINTENANCE OF PROPERTY; ACCESSIBILITY;
HAZARDOUS WASTE.

                  (a)      Borrower shall keep all Improvements now existing or
hereafter erected on the Real Property in good order and repair, only to be used
for the Existing Use, and not to do or permit any waste, impairment or
deterioration thereof or thereon, nor to alter, remove or demolish any of the
Improvements or any Fixtures and Personal Property attached or appertaining
thereto, without the prior written consent of Lender, nor to initiate, join in
or

                                                                 Omaha, Nebraska

                                       6


consent to any change in any private restrictive covenant, zoning ordinance
or other public or private restrictions limiting or defining the uses which may
be made of the Property or any part thereof, nor to do or permit any other act
whereby the Property shall become less valuable, be used for purposes contrary
to applicable Law or be used in any manner which will increase the premium for
or result in a termination or cancellation of the insurance policies hereinafter
required to be kept and maintained on the Property. In furtherance of, and not
by way of limitation upon, the foregoing covenant, Borrower shall effect such
repairs as Lender may reasonably require, and from time to time make all needful
and proper replacements so that the Improvements, Appurtenances, Fixtures and
Personal Property will, at all times, be in good condition, fit and proper for
the respective purposes for which they were originally erected or installed. In
connection with the making of such repairs, Borrower shall use contractors who
are properly licensed, who carry workers' compensation insurance and appropriate
liability insurance, who generally have a good reputation for completing their
work in a neat, prompt and workmanlike manner, and use only new or
re-manufactured goods of a quality as good or better than that originally used
on the Property. As provided herein, Borrower shall insure that no liens are
filed against the Property that relate in any way to the repair work provided
for herein. For so long as that certain Lease of the Property (the "BORDERS
LEASE") dated November 14, 2002 between Borrower, as landlord, and Border's,
Inc., a Colorado corporation ("BORDERS") as tenant remains in effect with
Borders as the tenant thereunder and Borrower is diligently enforcing the
obligations of Borders thereunder, Borrower shall be deemed to be in compliance
with the requirements of this subparagraph.

         Borrower at all times shall keep the Property and ground water of the
Property free of Hazardous Materials (as hereinafter defined) to the extent
required by applicable governmental agencies and free of any liens arising in
connection therewith. Borrower shall not and shall not knowingly permit its
tenants or any third party requiring the consent of Borrower to enter the
Property, to use, generate, manufacture, treat, store, release, threaten
release, transport on or over, emit or dispose of Hazardous Materials in, on,
over, under or about the Property including the ground water of the Property in
violation of any federal, regional, state or local law, code, ordinance,
statute, rule, regulation, decision or order currently in existence or hereafter
enacted or rendered (collectively, "HAZARDOUS WASTE LAWS"). Borrower shall give
Lender prompt Written Notice (as hereinafter defined) of any claim by any
person, entity, or governmental agency that a significant release or disposal of
Hazardous Materials has occurred in, on, over, under or about the Property,
including the ground water of the Property, in excess of those permitted by the
Hazardous Waste Laws, whether caused by the Borrower, any tenant or any third
party. Borrower, through its professional engineers and at Borrower's sole cost,
shall promptly and thoroughly investigate any suspected release of Hazardous
Materials in, on, over, under or about the Property, including the ground water
of the Property. Borrower shall forthwith remove, repair, remediate, clean up,
and/or detoxify any Hazardous Materials found in, on, over, under or about the
Property or in the ground water of the Property to the extent such actions are
required by any applicable Hazardous Waste Laws, and whether or not Borrower was
responsible for the existence of the Hazardous Materials in, on,

                                                                 Omaha, Nebraska

                                       7


over, under or about the Property or the ground water of the Property.
"HAZARDOUS MATERIALS" shall include, but not be limited to, substances defined
as "hazardous substances," "hazardous materials," or "toxic substances" under
any Hazardous Waste Laws.

                  (b)      In addition, Borrower shall not incorporate any
underground storage tanks into the Real Property without the prior written
consent of Lender, and shall insure that all tanks currently on the Real
Property comply with current Hazardous Waste Laws and underground storage tank
regulations and are properly registered.

         Borrower hereby agrees to indemnify and defend Lender and hold Lender
harmless from and against any and all losses, liabilities, damages, injuries,
costs, expenses, fines, fees, suits, actions, debts, obligations, and claims of
any and every kind whatsoever, including Reasonable Attorneys' Fees
(collectively, "LOSSES") paid, incurred or suffered by, or asserted against,
Lender for, with respect to, or as a direct or indirect result of, the presence
in, on, over, under or about, or the escape, seepage, leakage, spillage,
discharge, emission or release from, the Property of any Hazardous Materials
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Hazardous Waste Laws),
regardless of the source of origination and whether or not caused by, or within
the control of, Borrower and including any claims of lender's negligence or
strict liability, but excluding Lender's willful misconduct or gross negligence.

         Liability under this Section 3(b) and similar provisions in this
Mortgage and the other Loan Documents concerning Hazardous Materials shall
survive repayment of the Note and satisfaction of this Mortgage; provided,
however, Borrower shall have no liability under this Section 3(b) regarding
Hazardous Materials if either (i) the Property becomes contaminated subsequent
to Lender's acquisition of the Property by foreclosure, acceptance by Lender of
a deed in lieu thereof, or subsequent to any transfer of ownership of the
Property which was approved or authorized by Lender in writing, pursuant to this
Mortgage, provided that such transferee assumes in writing all of the
obligations of Borrower with respect to Hazardous Materials pursuant to the Loan
Documents, or (ii) at such time Borrower provides Lender with an environmental
assessment report acceptable to Lender, in Lender's sole discretion, showing the
Property to be free of Hazardous Materials and not in violation of any Hazardous
Waste Laws. The burden of proof under this Section 3(b) with regard to
establishing the date upon which any Hazardous Materials was released in, on,
over, under or about the Property shall be upon Borrower.

                  (c)      Borrower at all times shall maintain the Property in
full compliance with all federal, state, county, regional or local laws, codes,
ordinances, rules, regulations, decisions and orders currently in existence or
hereafter enacted or rendered, governing accessibility for the disabled,
including but not limited to: The Architectural Barriers Act of 1968; The
Rehabilitation Act of 1973; The Fair Housing Act of 1988 and the Americans with
Disabilities Act (collectively, the "ACCESSIBILITY LAWS").

                                                                 Omaha, Nebraska

                                       8


         Borrower hereby agrees to indemnify and defend Lender and hold Lender
harmless from and against any and all Losses paid, incurred or suffered by, or
asserted against Lender for, with respect to, or as a direct or indirect result
of, the non-compliance of the Property with the Accessibility Laws whether or
not caused by, or within the control of, Borrower, and including any claims of
lender's negligence or strict liability, but excluding Lender's willful
misconduct or gross negligence.

         Liability under this Section 3(c) and similar provisions in this
Mortgage and the other Loan Documents concerning Accessibility Laws shall
survive repayment of the Note and satisfaction of this Mortgage; provided,
however, Borrower shall not be liable under this Section 3(c) for compliance
with any Accessibility Laws if such Accessibility Laws first become effective,
or such violations result from alterations or improvements to the Property that
are performed subsequent to Lender's acquisition of the Property by foreclosure
or acceptance of a deed in lieu thereof or subsequent to any transfer which was
approved or authorized by Lender pursuant to this Mortgage, provided that such
transferee assumes in writing all obligations pertaining to the Accessibility
Laws pursuant to this Mortgage and the other Loan Documents. The burden of proof
under this Section 3(c) with regard to establishing the date upon which such
non-compliance with any Accessibility Laws occurred at the Property shall be
upon Borrower.

                  (d)      Lender, and/or its agents, shall have the right and
shall be permitted, subject to the rights of Borders under the Borders Lease,
but shall not be required, at all reasonable times, to enter upon and inspect
the Property to insure compliance with the foregoing covenants, and any and all
other terms, covenants, conditions and agreements set forth in this Mortgage.

         4.       PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES. Borrower
shall pay, or cause to be paid, all taxes, assessments and other charges as
already levied or assessed, or that may be hereafter levied or assessed, upon or
against the Property, when the same shall become due and payable according to
Law, before delinquency, and before any interest or penalty shall attach
thereto, and to deliver official receipts evidencing the payment of the same to
Lender not later than thirty (30) days following the payment of the same.
Borrower shall have the right to contest, in good faith and in accordance with
applicable Laws and procedures, the proposed assessment of ad valorem taxes or
special assessments by governmental authorities having jurisdiction over the
Property; provided, however, Borrower shall give Written Notice of its intent to
bring such an action to Lender, and Lender may, in its sole discretion, require
Borrower to post a bond or other collateral satisfactory to Lender (and
acceptable to the title company insuring this Mortgage) as a result of
Borrower's act.

                                                                 Omaha, Nebraska

                                       9


         5.       PAYMENT OF LIENS, CHARGES AND ENCUMBRANCES. Borrower shall
immediately pay and discharge from time to time when the same shall become due,
all lawful claims and demands of mechanics, materialmen, laborers, realtors,
brokers and others which, if unpaid, might result in, or permit the creation of,
a lien, charge or encumbrance upon the Property or any part thereof, or on the
Rents, arising therefrom and, in general, to do or cause to be done everything
necessary so that the lien of this Mortgage shall be fully preserved, at the
sole cost of Borrower, without expense to Lender. Borrower shall have the right
to contest, in good faith and in accordance with applicable Laws and procedures,
mechanics', materialmens' and other such liens filed against the Property;
provided however, that Borrower shall give Written Notice to Lender of its
intent to bring such action, and Lender may, in Lender's sole discretion,
require Borrower to post a bond or other collateral satisfactory to Lender (and
acceptable to the title company insuring this Mortgage) as a result of
Borrower's act.

         6.       PAYMENT OF JUNIOR ENCUMBRANCES. Borrower shall permit no
default or delinquency under any other lien, imposition, charge or encumbrance
against the Property, even though junior and inferior to the lien of this
Mortgage; provided however, the foregoing shall not be construed to permit any
such additional lien or encumbrance against the Property, other than the
Permitted Exceptions.

         7.       PAYMENT OF MORTGAGE TAXES. Borrower shall pay any and all
taxes which may be levied or assessed directly or indirectly upon the Note
and/or this Mortgage (except for income taxes payable by Lender) or the Loan,
without regard to any Law which may be hereafter enacted imposing payment of the
whole or any part thereof upon Lender, its successors or assigns. Upon violation
of this covenant, or upon the rendering by any court of competent jurisdiction
of a decision that such a covenant by Borrower is legally inoperative, or if any
court of competent jurisdiction shall render a decision that the rate of said
tax when added to the rate of interest provided for in the Note exceeds the then
maximum rate of interest allowed by Law, then, and in any such event, the debt
hereby secured shall, at the option of Lender, its successors or assigns, become
immediately due and payable, anything contained in this Mortgage or in the Note
notwithstanding, without the imposition of a Prepayment Premium (as defined in
the Note). The additional amounts which may become due and payable hereunder
shall become a part of the Loan secured by this Mortgage.

         8.       HAZARD INSURANCE. Borrower shall continuously, during the term
of this Mortgage, keep the Improvements, Appurtenances, and Fixtures and
Personal Property, now or hereafter existing, erected, installed and located in
or upon the Real Property, insured with extended coverage insurance against loss
or damage resulting from fire, windstorm, flood, sinkhole, earthquake, mine
subsidence, acts of terrorism, and such other hazards, casualties, contingencies
and perils including, without limitation, other risks insured against by persons
operating like properties in the locality of the Property, or otherwise deemed
necessary or advisable by Lender or any Rating Agency (as hereinafter defined),
on such forms and with

                                                                 Omaha, Nebraska

                                       10


such deductibles as may be required by Lender or any Rating Agency, covering the
Property in the amount of the full replacement cost thereof, (without taking
into account any depreciation) less excavating and foundation costs, and
covering all loss or abatement of rental or other income, without a provision
for co-insurance, in an amount equal to the scheduled rental income of the
Property for at least twelve (12) months, or if applicable, business
interruption insurance in an amount sufficient to pay debt service on the Note,
operating expenses, taxes and insurance on the Property for a period of twelve
(12) months, and covering loss by flood (if the Property lies in a Special Flood
Hazard Area as designated on the Department of Housing and Urban Development's
Maps, or other flood prone designation) in an amount equal to the outstanding
principal balance of the Loan or such other amount as approved by Lender, and
earthquake insurance with a deductible amount of no more than ten percent (10%)
of the policy amount if, in the judgment of Lender's inspecting architect, the
Property lies in an area of anticipated significant seismic activity, and
"Ordinance or Law Coverage" or "Enforcement" endorsements in amounts
satisfactory to Lender if any of the Improvements or the use of the Property
shall at any time constitute legal non-conforming structures or uses or the
ability to rebuild the Improvements is restricted or prohibited, and
comprehensive boiler and machinery insurance (without exclusion for explosion),
if applicable, in amounts as shall be reasonably required by Lender or any
Rating Agency and covering all boilers or other pressure vessels, machinery and
equipment located at or about the Property (including, without limitation,
electrical equipment, sprinkler systems, heating and air conditioning equipment,
refrigeration equipment and piping). All such insurance shall be carried with a
company or companies licensed to do business in the State, which is acceptable
to Lender, which company or companies shall have a rating at the time this
Mortgage is executed equivalent to at least A:X as shown in the most recent
Best's Key Rating Guide. The original policy or policies and renewals thereof
(or, at the sole option of Lender, duplicate originals or certified copies
thereof), together with receipts evidencing payment of the premium therefor,
shall be deposited with, held by and are hereby assigned to, Lender as
additional security for the Loan. Each such policy of insurance shall contain a
noncontributing loss payable clause in favor of and in a form acceptable to
Lender, and shall provide for not less than thirty (30) days prior Written
Notice to Lender of any intent to modify, non-renew, cancel or terminate the
policy or policies, or the expiration of such policies of insurance, or the
exclusion of any individual risk such as acts of terrorism. If the insurance
required under this Section 8 or any portion thereof is maintained pursuant to a
blanket policy, Borrower shall furnish to Lender a certified copy of such
policy, together with an original Evidence of Insurance Certificate (Acord Form
27) for hazard insurance indicating that Lender is an additional insured under
such policy in regard to the Property and showing the amount of coverage
apportioned to the Property, which coverage shall be in an amount sufficient to
satisfy the requirements hereof. Not less than fifteen (15) days prior to the
expiration dates of each policy required of Borrower hereunder, Borrower will
deliver to Lender a renewal policy or policies marked "premium paid" or
accompanied by other evidence of payment and renewal satisfactory to Lender. In
the event of foreclosure of this Mortgage or other transfer of title to the
Property in extinguishment of the Loan, all right, title and interest of
Borrower, in and to any insurance policies then in force including any

                                                                 Omaha, Nebraska

                                       11


rights to unearned premiums, and in and to insurance proceeds then payable,
shall pass to the purchaser or grantee.

         For so long as the Borders Lease remains in effect with Borders as the
tenant thereunder, then to the extent that Borders self-insures to satisfy its
insurance obligations under the Borders Lease, Lender shall accept such
self-insurance as satisfying the obligation of Borrower to provide insurance
under this Section 8, provided that (i) Borders, or the guarantor of the Borders
Lease, Boarders Group, Inc., maintains a minimum net worth of not less than Two
Hundred Fifty Million Dollars ($250,000,000.00), (ii) such self-insurance
otherwise satisfies the requirements of this Section 8 as to the amount required
to be maintained by Borders, and (iii) Borrower provides to Lender written
verification of such coverage in form and substance reasonably acceptable to
Lender. Notwithstanding the foregoing, Lender shall have the right require
Borrower to maintain in effect a separate policy of liability insurance with
respect to the Property meeting the requirements of Section 9 of this Mortgage.

         In the event of loss covered by insurance maintained by Borrower with
respect to the Property, including, without limitation, insurance covering
hazards, casualties, contingencies and perils for which insurance has been
required by Lender hereunder, Borrower shall give immediate notice thereof to
Lender. Lender is hereby irrevocably appointed attorney-in-fact coupled with an
interest for Lender to, at its option, make proof of loss and/or to file a claim
thereunder. Each insurance company concerned is hereby notified, authorized and
directed to make payment for such loss directly to Lender, instead of to
Borrower and Lender jointly, and Borrower hereby authorizes Lender to adjust and
compromise any losses for which insurance proceeds are payable under any of the
aforesaid insurance policies and, after deducting the costs of collection, to
apply the proceeds of such insurance, at its option either: (a) to the
restoration or repair of the insured Improvements, Appurtenances, and Fixtures
and Personal Property, provided that, in the opinion and sole discretion of
Lender, such restoration or repair is reasonably practical and, provided
further, that, in the opinion and sole discretion of Lender, either: (i) the
insurance proceeds so collected are sufficient to cover the cost of such
restoration or repair of the damage or destruction with respect to which such
proceeds were paid, or (ii) the insurance proceeds so collected are not
sufficient alone to cover the cost of such restoration or repair, but are
sufficient therefor when taken together with funds provided and made available
by Borrower from other sources; in which event Lender shall make such insurance
proceeds available to Borrower for the purpose of effecting such restoration or
repair; but Lender shall not be obligated to see to the proper application of
such insurance proceeds nor shall the amount of funds so released or used be
deemed to be payment of or on account of the Loan; or (b) to the reduction of
the Loan, notwithstanding the fact that the amount owing thereon may not then be
due and payable or that said Loan is otherwise adequately secured, in which
event such proceeds shall be applied at par against the Loan and the monthly
payment due on account of such Loan shall be reduced accordingly as calculated
by Lender. None of such actions taken by Lender shall be deemed to be or result
in a waiver or impairment of any equity, lien or right of Lender under and by
virtue of this Mortgage, nor

                                                                 Omaha, Nebraska

                                       12


will the application of such insurance proceeds to the reduction of the Loan
serve to cure any default in the payment thereof. In the event of foreclosure of
this Mortgage or other transfer of title to the Property in extinguishment of
the Loan, all right, title and interest of Borrower in and to any insurance
policies then in force including any rights to unearned premiums and in and to
insurance proceeds then payable, shall pass to the purchaser or grantee.

         In case of Borrower's failure to keep the Property properly insured as
required herein, Lender, its successors or assigns, may, at its option (but
shall not be required to) acquire such insurance as required herein at
Borrower's sole expense.

         Notwithstanding anything set forth in this Section 8 to the contrary,
in the event of loss or damage to the Property by fire or other casualty covered
by insurance maintained by Borrower with respect to the Property, including,
without limitation, insurance which has been required by Lender hereunder and
provided by Borrower, and the amount of such loss or damage does not exceed
twenty-five percent (25%) of the unpaid principal balance of the Note, Lender
hereby agrees to allow the proceeds of insurance to be used for the restoration
of the Property and to release such insurance proceeds to Borrower as such
restoration progresses, provided:

                  (a)      Borrower is not in default under any of the terms,
covenants and conditions of this Mortgage, the Note or any of the other Loan
Documents;

                  (b)      The Improvements, after such restoration, shall be at
least eighty percent (80%) leased pursuant to leases approved in writing by
Lender;

                  (c)      The plans and specifications for the restoration of
the Property are approved in writing by Lender in advance;

                  (d)      At all times during such restoration, Borrower has
deposited with Lender funds which, when added to the insurance proceeds received
by Lender, are sufficient to complete the restoration of the Property in
accordance with the approved plans and specifications, and all applicable
building codes, zoning ordinances, regulations and Accessibility Laws, and
further, that the funds retained by Lender are sufficient to complete the
restoration of the Property as certified to Lender by Lender's inspecting
architect/engineer;

                  (e)      Borrower provides suitable completion, payment and
performance bonds, builders' all risk insurance, and all necessary licenses and
permits for such restoration in form and amount acceptable to Lender;

                  (f)      The insurer under such policies of fire or other
casualty insurance does not assert any defense to payment under such policies
against Lender, Borrower, any tenant, or third party of Borrower with regard to
the Property;

                                                                 Omaha, Nebraska

                                       13


                  (g)      Lender shall have the option, upon the completion of
such restoration of the Property, to apply any surplus insurance proceeds
remaining after the completion of such restoration, at par, to the reduction of
the outstanding principal balance of the Note; notwithstanding the fact that the
amount owing thereon may not then be due and payable or that said Loan is
otherwise adequately secured;

                  (h)      The funds held by Lender shall be disbursed no more
often than once per month and in not more than five (5) increments of not less
than Fifty Thousand Dollars ($50,000) each, except the final disbursement of
such funds which may be in an amount less than Fifty Thousand Dollars ($50,000);

                  (i)      Lender's obligation to make any such disbursement
shall be conditioned upon Lender's receipt of written certification from
Lender's inspecting architect/engineer (whose fees shall be reimbursed to Lender
by Borrower) that all construction and work for which such disbursement is
requested has been completed in accordance with the approved plans and
specifications and in accordance with all applicable building codes, zoning
ordinances and all other Laws and, further, that Borrower has deposited with
Lender sufficient funds to complete such restoration in accordance with Section
8(d);

                  (j)      In the reasonable judgment of the Lender, the
Property can be restored within six months after insurance proceeds are made
available and at least six months prior to the Maturity Date (as defined in the
Note) to an economic unit not less valuable (including an assessment by Lender
of the impact of the termination of any Occupancy Leases due to such casualty)
and not less useful than the same was prior to the casualty, and after such
restoration will adequately secure the outstanding balance of the Loan; and

                  (k)      Lender shall be entitled to require and to impose
such other conditions to the release of such funds as would be customarily or
reasonably be required and imposed by institutional mortgage lenders for a
project of similar nature and cost.

         In the event of a casualty, provided that Borrower is not then in
default hereunder beyond the expiration of applicable notice and cure periods,
then notwithstanding any provision of this Section 8 to the contrary, Lender
shall make insurance proceeds available for restoration of the Property to the
extent required under the terms of the Borders Lease.

         9.       LIABILITY INSURANCE. Borrower shall carry and maintain such
commercial general liability insurance as may from time to time be required by
Lender or any Rating Agency, taking into consideration the type of property
being insured and the corresponding liability exposure, on forms, with
deductibles, in amounts and with such company or companies licensed to do
business in the State and as may be acceptable to Lender. All such commercial
general liability insurance shall be carried with a company or companies which
have and maintain a rating equivalent to at least A:X as shown in the most
recent Best's

                                                                 Omaha, Nebraska

                                       14


Key Rating Guide. The original policy or policies and all renewals thereof (or,
at the sole option of Lender, duplicate originals or certified copies thereof),
together with a Certificate of Insurance (Acord Form 25S) and receipts
evidencing payment of the premium therefor, shall be deposited with, held by and
are hereby assigned to, Lender as additional security for the Loan. Such policy
or policies of insurance shall name Lender as an additional insured and shall
provide for not less than thirty (30) days prior Written Notice to Lender of any
intent to modify, cancel, non-renew, or terminate the policy or policies or the
expiration of such policy or policies of insurance, or the exclusion of any
individual risk such as acts of terrorism. Not less than fifteen (15) days prior
to the expiration dates of each policy or policies required of Borrower
hereunder, Borrower will deliver to Lender a renewal policy or policies marked
"premium paid" or accompanied by other evidence of payment and renewal
satisfactory to Lender. In the event of foreclosure of this Mortgage or other
transfer of title to the Property in extinguishment of the Loan, all right,
title and interest of Borrower, in and to any insurance policies then in force
including any rights to unearned premiums, and in and to insurance proceeds then
payable, shall pass to the purchaser or grantee. In case of Borrower's failure
to keep the Property properly insured as required herein, Lender, its successors
or assigns, may, at its option (but shall not be required to) acquire such
insurance as required herein at Borrower's sole expense.

         10.      COMPLIANCE WITH LAWS.

                  (a)      Borrower shall observe, abide by and comply with all
federal, regional, state and local laws, codes, ordinances, statutes, rules,
regulations, decisions, orders, requirements or decrees relating to the Property
enacted, promulgated or issued by any federal, state, county or local
governmental or quasi-governmental authority or any agency or subdivision
thereof having jurisdiction over Borrower or the Property, which now or
hereafter affect Borrower or the Property, including Hazardous Waste Laws and
Accessibility Laws (collectively, the "LAWS"), and to observe and comply with
all conditions and requirements necessary to preserve and extend any and all
rights, licenses, permits (including, but not limited to, zoning, variances,
special exceptions and nonconforming uses), privileges, franchises and
concessions which are applicable to the Property, or which have been granted to
or contracted for by Borrower in connection with any existing, presently
contemplated or future uses of the Property.

                  (b)      Borrower shall not engage in any transaction which
would cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Note, this Mortgage and the
other Loan Documents) to be a non-exempt (under a statutory or administrative
class exemption) prohibited transaction under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Borrower shall deliver to Lender
such certifications or other evidence from time to time throughout the term of
this Mortgage, as requested by Lender in its sole discretion, that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of

                                                                 Omaha, Nebraska

                                       15


ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA;
(ii) Borrower is not subject to state statutes regulating investments and
fiduciary obligations with respect to governmental plans; and (iii) one or more
of the following circumstances is true:

                           (1)      Equity interests in Borrower are publicly
         offered securities, within the meaning of 29 C.F.R. Section
         2510.3-101(b)(2);

                           (2)      Less than twenty-five percent (25%) of each
         outstanding class of equity interests in Borrower are held by "benefit
         plan investors" within the meaning of 29 C.F.R. Section
         2510.3-101(f)(2); or

                           (3)      Borrower qualifies as an "operating company"
         or a "real estate operating company" within the meaning of 29 C.F.R.
         Section 2510.3-101(c) or (e) or an investment company registered under
         The Investment Company Act of 1940.

         11.      MAINTENANCE OF PERMITS. Borrower shall obtain, keep and
constantly maintain in full force and effect during the entire term of this
Mortgage, all certificates, licenses and permits necessary to keep the Property
operating for the Existing Use and, except as specifically provided for in this
Mortgage, not to assign, transfer or in any manner change such certificates,
licenses or permits without first receiving the written consent of Lender.

         12.      OBLIGATIONS OF BORROWER AS LESSOR.

                  (a)      Borrower shall perform every obligation of Borrower
(as the landlord) and enforce every obligation of the tenant in any and every
lease, license or other occupancy agreement of or affecting the Property or any
part thereof (the "OCCUPANCY LEASES"), and not to modify, alter, waive or cancel
any such Occupancy Leases or any part thereof or rights thereunder, without the
prior written consent of Lender (but such consent shall not be required for such
action as to Occupancy Leases of three thousand (3,000) square feet or less if
such action is in the ordinary course of business of owning and operating the
Property in a prudent and business-like manner, on then current market terms),
nor collect for more than thirty (30) days in advance of the date due any Rents
that may be collectible under any such Occupancy Leases and, except as provided
for in this Mortgage, not to assign any such Occupancy Lease(s) or any such
Rents relating thereto, to any party other than Lender, without the prior
written consent of Lender. Borrower will notify Lender in writing of any default
under any Occupancy Lease. In the event of default under any such Occupancy
Lease by reason of failure of Borrower to keep or perform one or more of the
covenants, agreements or conditions thereof, Lender is hereby authorized and
empowered, and may, at its sole option, remedy, remove or cure any such default,
and further, Lender may, at its sole option and in its sole discretion but
without obligation to do so, pay any sum of money deemed necessary by Lender for
the performance of said covenants, agreements and conditions, or for the curing
or removal

                                                                 Omaha, Nebraska

                                       16


of any such default, and incur all expenses and obligations which Lender may
consider necessary or reasonable in connection therewith, and Borrower shall
repay on demand all such sums so paid or advanced by Lender together with
interest thereon until paid at the lesser of either: (i) the highest rate of
interest then allowed by the Laws of the State, or, if controlling, the Laws of
the United States, or (ii) the then applicable interest rate of the Note plus
five hundred (500) basis points per annum; all of such sums, if unpaid, shall be
added to and become part of the Loan.

                  (b)      All such Occupancy Leases hereafter made shall be
subject to the approval of Lender and: (i) shall be at competitive market rental
rates then prevailing in the geographic area for projects used for the Existing
Use comparable to the Property; (ii) shall have lease terms of not less than
three years; and (iii) at Lender's option, shall be superior or subordinate in
all respects to the lien of this Mortgage. Provided, however, that Lender shall
not require approval in advance of any Occupancy Leases which conform to the
Borrower's Form Lease (as hereinafter defined) as previously approved by Lender,
except as set forth below. Neither the right nor the exercise of the right
herein granted unto Lender to keep or perform any such covenants, agreements or
conditions as aforesaid shall preclude Lender from exercising its option to
cause the whole Loan to become immediately due and payable by reason of
Borrower's default in keeping or performing any such covenants, agreements or
conditions.

                  (c)      Lender has approved a form of Occupancy Lease to be
used by Borrower in connection with the Property (the "FORM LEASE"). Borrower
shall not, without the prior written consent of Lender, modify or alter the Form
Lease in any material respect. In addition, Borrower shall not, without the
prior written consent of Lender, surrender, terminate, modify or alter, either
orally or in writing, any Occupancy Lease now existing or hereafter made with
any Major Tenant (as hereinafter defined) for all or part of the Property,
permit an assignment or sublease of any such Occupancy Lease, or request or
consent to the subordination of any Occupancy Lease to any lien subordinate to
this Mortgage. Borrower shall furnish Lender with copies of all executed
Occupancy Leases of all or any part of the Property now existing or hereafter
made, and Borrower shall assign to Lender (which assignment shall be in form and
content acceptable to Lender), as additional security for the Note and the Loan,
all Occupancy Leases now existing or hereafter made for all or any part of the
Property.

                  (d)      Notwithstanding the foregoing approval by Lender of
Borrower's Form Lease, Lender hereby specifically reserves the right to approve
all prospective tenants under all Occupancy Leases hereafter proposed to be made
if either: (i) the term thereof, excluding options to renew the same, exceeds
five years; or (ii) the net rentable area to be occupied thereunder, including
expansion options, exceeds ten percent (10%) of the net leasable area of each of
the buildings comprising the Improvements (the tenants under such leases being
hereinafter referred to as "MAJOR TENANTS"). Borrower shall notify Lender in
writing of all

                                                                 Omaha, Nebraska

                                       17


prospective Major Tenants, and shall deliver to Lender, at Borrower's sole cost
and expense, a copy of the prospective Major Tenant's current financial
statement and the most recent Dun & Bradstreet credit report on said prospective
Major Tenant. The financial statement delivered to Lender hereunder shall be
certified as true and correct by the Major Tenant, or, if available, by a
certified public accountant.

                  (e)      In no event shall Borrower exercise any right to
relocate any tenant outside the Property pursuant to any right set forth in an
Occupancy Lease without the prior written consent of Lender.

         13.      MAINTENANCE OF PARKING & ACCESS PROHIBITION AGAINST
ALTERATION; SEPARATE TAX LOT.

                  (a)      Borrower shall construct, keep and constantly
maintain, as the case may be, all curbs, drives, parking areas and the number of
parking spaces heretofore approved by Lender, or heretofore or hereafter
required by any Laws or any governmental body, agency or authority having
jurisdiction over Borrower or the Property, and as required by the terms of the
Occupancy Leases, and not to alter, erect, build or construct upon any portion
of the Property, any building, structure or improvement of any kind whatsoever,
the erection, building or construction of which has not been previously approved
by Lender in writing, which approval shall be at the sole discretion of Lender.

                  (b)      Borrower shall cause the Property to remain
separately assessed for real estate tax purposes as a separate tax lot or lots.

         14.      EXECUTION OF ADDITIONAL DOCUMENTS. Borrower shall do, make,
execute, acknowledge, witness and deliver all deeds, conveyances, mortgages,
deeds of trust, assignments, estoppel certificates, subordination
non-disturbance and attornments, notices of assignments, transfers, assurances,
security agreements, financing statements and renewals thereof, and all other
instruments or other acts necessary, as Lender shall from time to time require
for the purpose of better assuring, conveying, assigning, transferring, securing
and confirming unto Lender the Property and rights hereby encumbered, created,
conveyed, assigned or intended now or hereafter so to be encumbered, created,
conveyed or assigned, or which Borrower may now be or may hereafter become bound
to encumber, create, convey or assign to Lender, or for the purpose of carrying
out the intention or facilitating the performance of the terms of this Mortgage,
or for filing, registering or recording this Mortgage, and to pay all filing,
registration or recording fees and all taxes, costs and other expenses,
including Reasonable Attorneys' Fees, incident to the preparation, execution,
acknowledgment, delivery and recordation of any of the same. By signing this
Mortgage, Borrower authorizes Lender to file such financing statements, with or
without the signature of Borrower, as Lender may elect, as may be necessary or
desirable to perfect the lien of Lender's security interest in the Fixtures and
Personal Property. Without limiting any other

                                                                 Omaha, Nebraska

                                       18


provision herein, Borrower hereby authorizes Lender to file one or more
financing statements and any renewal or continuation statements thereof,
describing the Property and the proceeds of the Property, including, without
limitation, a financing statement covering "all assets of Borrower all proceeds
therefrom, and all rights and privileges with respect thereto." Borrower further
authorizes Lender to file, with or without any additional signature from
Borrower, as Lender may elect, such amendments and continuation statements as
Lender may deem necessary or desirable from time to time to perfect or continue
the lien of Lender's security interest in the Fixtures and Personal Property.
Borrower hereby ratifies any financing statements that may have been filed by
Lender in advance of the date hereof to perfect Lender's security interest in
the Fixtures and Personal Property.

         15.      AFTER-ACQUIRED PROPERTY SECURED. Borrower shall subject to the
lien of this Mortgage all right, title and interest of Borrower in and to all
extensions, improvements, betterments, renewals, substitutions and replacements
of, and all additions and appurtenances to, the Property hereinabove described,
hereafter acquired by or released to Borrower, or constructed, assembled or
placed by Borrower on the Real Property, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, deed of trust, encumbrance, conveyance, assignment
or other act by Borrower, as fully, completely and with the same effect as
though now owned by Borrower and specifically described herein, but at any and
all times, Borrower will execute and deliver to Lender any and all such further
assurances, mortgages, deeds of trust, conveyances, security agreements,
financing statements or assignments thereof or security interests therein as
Lender may reasonably require for the purpose of expressly and specifically
subjecting the same to the lien of this Mortgage.

         16.      PAYMENTS BY LENDER ON BEHALF OF BORROWER. Borrower shall make
payment of any taxes, assessments or public charges on or with respect to the
Property before the same shall become delinquent, or to make payment of any
insurance premiums or other charges, impositions, or liens herein or elsewhere
required to be paid by Borrower, or if Borrower shall fail so to do, then
Lender, at its sole option, but without obligation to do so, may make payment or
payments of the same and also may redeem the Property from tax sale without any
obligation to inquire into the validity of such taxes, assessments, charges,
impositions or liens. In the case of any such payment by Lender, Borrower agrees
to reimburse Lender, upon demand therefor, the amount of such payment and of any
fees and expenses attendant in making the same, together with interest thereon
at the lesser of either: (a) the highest rate of interest then allowed by the
Laws of the State or, if controlling, the Laws of the United States, or (b) the
then applicable interest rate of the Note plus five hundred (500) basis points
per annum; and until paid such amounts and interest shall be added to and become
part of the Loan to the same extent that this Mortgage secures the repayment of
the Loan. In making payments authorized by the provisions of this Section 16,
Lender may do so whenever, in Lender's sole judgment and discretion, such
advance or advances are necessary

                                                                 Omaha, Nebraska

                                       19


or desirable to protect the full security intended to be afforded by this
Mortgage. Neither the right nor the exercise of the rights herein granted to
Lender to make any such payments as aforesaid shall preclude Lender from
exercising its option to cause the Loan to become immediately due and payable by
reason of Borrower's default in making such payments as hereinabove required.

         17.      FUNDS HELD BY LENDER FOR TAXES, ASSESSMENTS, INSURANCE
PREMIUMS, AND OTHER CHARGES. In order to more fully protect the security of this
Mortgage, Borrower shall deposit with Lender, together with and in addition to
each monthly payment due on account of the Loan, an amount equal to one-twelfth
(1/12th) of the annual total of such taxes, assessments, insurance premiums and
other charges (all as estimated by Lender in its sole discretion) so that, at
least thirty (30) days prior to the due date thereof, Lender shall be able to
pay in full all such taxes, assessments, insurance premiums and other charges as
the same shall become due. Lender may hold the sums so deposited without paying
interest, commingle same with its general funds and/or apply the same to the
payment of said taxes, assessments, insurance premiums or other charges as they
become due and payable. If at any time the funds so held by Lender are
insufficient to pay such taxes, assessments, insurance premiums or other charges
as they become due and payable, Borrower shall immediately, upon Written Notice
and demand by Lender, deposit with Lender the amount of such deficiency. The
failure on the part of Borrower to do so shall entitle Lender, at Lender's sole
option, to make such payments in accordance with the rights and pursuant to the
conditions elsewhere provided in this Mortgage. Borrower hereby grants to Lender
a security interest in all funds deposited with Lender, and such funds are
hereby pledged by Borrower to Lender for the purpose of securing all
indebtedness and obligations secured by this Mortgage. Whenever any default
exists under this Mortgage, Lender may, at Lender's sole option but without an
obligation so to do, apply any funds so held by Lender pursuant to this Section
17 toward the payment of the Loan, notwithstanding the fact that the amount
owing thereon may not then be due and payable or that the Loan may otherwise be
adequately secured, in such order and manner of application as Lender may elect.

         18.      CONDEMNATION; EMINENT DOMAIN. All claims and rights of action
for, and all awards and other compensation heretofore or hereafter made to
Borrower and all subsequent owners of the Property in any taking by eminent
domain, recovery for inverse condemnation or by deed in lieu thereof, whether
permanent or temporary, of all or any part of the Property or any easement or
any appurtenance thereto, including severance and consequential damages and
change in grade of any way, street, avenue, road, alley, passage or public
place, are hereby assigned to Lender. Borrower hereby irrevocably appoints
Lender as its attorney-in-fact, coupled with an interest, and authorizes,
directs and empowers Lender, at the option of Lender as said attorney-in-fact,
on behalf of Borrower, its successors and assigns, to adjust or compromise the
claim for any such award, and alone to collect and receive the proceeds thereof,
to give proper receipts and acquittances therefor and, after deducting any
expenses of collection, Lender shall at its sole option either:

                                                                 Omaha, Nebraska

                                       20


                  (a)      apply the net proceeds as a credit upon any portion
of the Loan, as selected by Lender, notwithstanding the fact that the amount
owing thereon may not then be due and payable, or that the Loan is otherwise
adequately secured. In the event Lender applies such awards to the reduction of
the outstanding Loan evidenced by the Note, such proceeds shall be applied at
par, and the monthly installments due and payable under the Note shall be
reduced accordingly as calculated by Lender; however no such application shall
serve to cure an existing default of Borrower; or

                  (b)      hold said proceeds without any allowance of interest,
and make the same available for restoration or rebuilding of the Improvements.
In the event that Lender makes said proceeds available to reimburse Borrower for
the cost of the restoration or rebuilding of the Improvements on the Real
Property, such proceeds shall be made available in the manner and under the same
conditions as required under Section 8 hereof. If the proceeds are made
available by Lender to reimburse Borrower for the cost of said restoration or
rebuilding, any surplus which may remain out of said award after payment of such
cost of restoration or rebuilding, shall be applied on account of the Loan at
par notwithstanding the fact that the amount owing thereon may not then be due
and payable or that the Loan may otherwise be adequately secured.

         In the event of a taking or condemnation, provided that Borrower is not
then in default hereunder beyond the expiration of applicable notice and cure
periods, then notwithstanding any provision of this Section 19 to the contrary,
Lender shall make condemnation proceeds available for restoration of the
Property to the extent required under the terms of the Borders Lease.

         Borrower further covenants and agrees to give Lender immediate notice
of the actual or threatened commencement of any proceedings under eminent
domain, and to deliver to Lender copies of any and all papers served in
connection with any such proceedings. Borrower further covenants and agrees to
make, execute and deliver to Lender, at any time or times, upon request, free,
clear and discharged of any encumbrance of any kind whatsoever, any and all
further assignments and/or other instruments deemed necessary by Lender for the
purpose of validly and sufficiently assigning all such awards and other
compensation heretofore or hereafter made to Lender (including the assignment of
any award from the United States government at any time after the allowance of
the claim therefor, the ascertainment of the amount thereof and the issuance of
the warrant for payment thereof).

         It shall be a default hereunder if either: (i) any part of any of the
Improvements situated on the Real Property shall be condemned by any
governmental authority having jurisdiction; or (ii) lands constituting a portion
of the Real Property shall be condemned by any governmental authority having
jurisdiction, such that the remaining Property is in violation of applicable
parking, zoning, platting, or other ordinances, or fails to comply with the
terms of the Occupancy Leases with Major Tenants. In either of said events,
Lender shall be entitled to

                                                                 Omaha, Nebraska

                                       21


exercise any or all remedies provided or referenced in this Mortgage or the
other Loan Documents, including the application of condemnation proceeds to the
outstanding principal balance of the Note at par, and the right to accelerate
the maturity date of the Note and require payment in full without the imposition
of a Prepayment Premium.

         19.      COSTS OF COLLECTION. In the event that the Note is placed in
the hands of an attorney for collection, or in the event that Lender shall
become a party either as plaintiff or as defendant, in any action, suit, appeal
or legal proceeding (including, without limitation, foreclosure, condemnation,
bankruptcy, administrative proceedings or any proceeding wherein proof of claim
is by law required to be filed), hearing, motion or application before any court
or administrative body in relation to the Property or the lien and security
interest granted or created hereby or herein, or for the recovery or protection
of the Loan or the Property, or for the foreclosure of this Mortgage, or for the
enforcement of the terms and conditions of the Loan Documents, Borrower shall
indemnify, save, defend and hold Lender harmless from and against any and all
Losses incurred by Lender on account thereof, and Borrower shall repay, on
demand, all such Losses, together with interest thereon until paid at the lesser
of either (a) the highest rate of interest then allowed by the Laws of the
State, or, if controlling, the Laws of the United States, or (b) the then
applicable rate of interest of the Note plus five hundred (500) basis points per
annum; all of which sums, if unpaid, shall be added to and become a part of the
Loan.

         20.      DEFAULT RATE. Any sums not paid when due, whether maturing by
lapse of time or by reason of acceleration under the provisions of the Note,
this Mortgage or any of the other Loan Documents, and whether principal,
interest or money owing for advancements pursuant to the terms of this Mortgage
or any other Loan Document, shall bear interest until paid at the lesser of
either (a) the highest rate of interest then allowed by the Laws of the State,
or, if controlling, the Laws of the United States, or (b) the then applicable
rate of interest of the Note plus five hundred (500) basis points per annum; all
of which sums shall be added to and become a part of the Loan.

         21.      SAVINGS CLAUSE. Notwithstanding any provisions in the Note or
in this Mortgage to the contrary, the total liability for payments in the nature
of interest, including but not limited to Prepayment Premiums, default interest
and late payment charges, shall not exceed the limits imposed by the Laws of the
State or, if controlling, the Laws of the United States, relating to maximum
allowable charges of interest. Lender shall not be entitled to receive, collect
or apply, as interest on the Loan, any amount in excess of the maximum lawful
rate of interest permitted to be charged by any Laws. In the event Lender ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to reduce the unpaid principal
balance of the Loan evidenced by the Note. If the unpaid principal balance of
such Loan has been paid in full, any remaining excess shall be forthwith
returned to Borrower.

                                                                 Omaha, Nebraska

                                       22


         22.      BANKRUPTCY, REORGANIZATION OR ASSIGNMENT.

                  (a)      It shall be a default hereunder if Borrower or any
general partner or managing member of Borrower shall: (a) elect to dissolve or
liquidate its business organization or wind up its business affairs without
receiving the prior written approval of Lender; (b) consent to the appointment
of a receiver, trustee or liquidator of all or a substantial part of its assets;
(c) be adjudicated as bankrupt or insolvent, or file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debts as they become
due; (d) make a general assignment for the benefit of creditors; (e) file a
petition under or take advantage of any insolvency law; (f) file an answer
admitting the material allegations of a petition filed against Borrower or any
general partner or managing member of Borrower in any bankruptcy, reorganization
or insolvency proceeding, or fail to cause the dismissal of such petition within
thirty (30) days after the filing of said petition; (g) take action for the
purpose of effecting any of the foregoing; or (h) if any order, judgment or
decree shall be entered upon an application of a creditor of Borrower or any
general partner or managing member of Borrower by a court of competent
jurisdiction approving a petition seeking appointment of a receiver or trustee
of all or a substantial part of Borrower's assets or any of Borrower's general
partner's or managing member's assets and such order, judgment or decree shall
continue unstayed and in effect for a period of thirty (30) days.

                  (b)      Borrower covenants and agrees that it has not and
shall not:

                           (i)      engage in any business or activity other
         than the acquisition, ownership, operation and maintenance of the
         Property, and activities incidental thereto;

                           (ii)     acquire or own any material asset other than
         (1) the Property, and (2) such incidental Fixtures and Personal
         Property as may be necessary for the operation of the Property;

                           (iii)    merge into or consolidate with any person or
         entity or dissolve, terminate or liquidate in whole or in part,
         transfer or otherwise dispose of all or substantially all of its assets
         or change its legal structure, without in each case Lender's consent;

                           (iv)     fail to preserve its existence as an entity
         duly organized, validly existing and in good standing under the laws of
         the jurisdiction of its organization or formation, or without the prior
         written consent of Lender, amend, modify, terminate or fail to comply
         with the provisions of Borrower's Governing Documents (as hereafter
         defined);

                           (v)      own any subsidiary or make any investment in
         or acquire the obligations or securities of any other person or entity
         without the consent of Lender;

                                                                 Omaha, Nebraska

                                       23


                           (vi)     commingle its assets with the assets of any
         of its partner, members, shareholders, affiliates, or of any other
         person or entity or transfer any assets to any such person or entity
         other than distributions on account of equity interests in the Borrower
         permitted hereunder and properly accounted for;

                           (vii)    incur any debt, secured or unsecured, direct
         or contingent (including guaranteeing any obligation, other than the
         Affiliate Loans), other than the Loan, except unsecured trade and
         operational debt incurred with trade creditors in the ordinary course
         of its business of owning and operating the Property in such amounts as
         are normal and reasonable under the circumstances, provided that such
         debt is not evidenced by a note and is paid when due and provided in
         any event the outstanding principal balance of such debt shall not
         exceed at any one time 1% of the outstanding Loan. Borrower shall not
         be deemed in default of the foregoing restrictions by virtue of any
         guaranty or cross default agreement delivered by Borrower with respect
         to the Affiliate Loans;

                           (viii)   allow any person or entity to pay its debts
         and liabilities (except a Guarantor - or in connection with the
         cross-default and cross collateralization of the Affiliate Loans) or
         fail to pay its debts and liabilities solely from its own assets;

                           (ix)     fail to maintain its records, books of
         account and bank accounts separate and apart from those of the
         shareholders, partners, members, principals and affiliates of Borrower,
         the affiliates of a shareholder, partner or member of Borrower, and any
         other person or entity or fail to prepare and maintain its own
         financial statements in accordance with generally accepted accounting
         principles and susceptible to audit, or if such financial statements
         are consolidated fail to cause such financial statements to contain
         footnotes disclosing that the Property is actually owned by the
         Borrower;

                           (x)      enter into any contract or agreement with
         any shareholder, partner, member, principal or affiliate of Borrower,
         any guarantor of all or a portion of the Loan (a "GUARANTOR") or any
         shareholder, partner, member, principal or affiliate thereof, except
         upon terms and conditions that are intrinsically fair and substantially
         similar to those that would be available on an arms-length basis with
         third parties other than any shareholder, partner, member, principal or
         affiliate of Borrower or Guarantor, or any shareholder, partner,
         member, principal or affiliate thereof;

                           (xi)     seek dissolution or winding up, in whole or
         in part;

                           (xii)    fail to correct any known misunderstandings
         regarding the separate identity of Borrower;

                                                                 Omaha, Nebraska

                                       24


                           (xiii)   hold itself out to be responsible or pledge
         its assets or credit worthiness for the debts of another person or
         entity or allow any person or entity to hold itself out to be
         responsible or pledge its assets or credit worthiness for the debts of
         the Borrower (except for a Guarantor);

                           (xiv)    make any loans or advances to any third
         party, including any shareholder, partner, member, principal or
         affiliate of Borrower, or any shareholder, partner, member, principal
         or affiliate thereof, except as may be required in connection with the
         cross default and cross collateralization of the Affiliate Loans;

                           (xv)     fail to file its own tax returns, if
         required under applicable law, or to use separate contracts, purchase
         orders, stationary, invoices and checks, except that Borrower may file
         a consolidated tax return with Agree Limited Partnership for reporting
         purposes;

                           (xvi)    fail either to hold itself out to the public
         as a legal entity separate and distinct from any other entity or person
         or to conduct its business solely in its own name in order not (1) to
         mislead others as to the entity with which such other party is
         transacting business, or (2) to suggest that Borrower is responsible
         for the debts of any third party (including any shareholder, partner,
         member, principal or affiliate of Borrower, or any shareholder,
         partner, member, principal or affiliate thereof);

                           (xvii)   fail to allocate fairly and reasonably among
         Borrower and any third party (including, without limitation, any
         Guarantor) any overhead for common employees, shared office space or
         other overhead and administrative expenses;

                           (xviii)  allow any person or entity to pay the
         salaries of its own employees or fail to maintain a sufficient number
         of employees for its contemplated business operations;

                           (xix)    fail to maintain adequate capital for the
         normal obligations reasonably foreseeable in a business of its size and
         character and in light of its contemplated business operations;

                           (xx)     share any common logo with or hold itself
         out as or be considered as a department or division of (1) any
         shareholder, partner, principal, member or affiliate of Borrower, (2)
         any affiliate of a shareholder, partner, principal, member or affiliate
         of Borrower, or (3) any other person or entity or allow any person or
         entity to identify the Borrower as a department or division of that
         person or entity; or

                                                                 Omaha, Nebraska

                                       25


                           (xxi)    conceal assets from any creditor, or enter
         into any transaction with the intent to hinder, delay or defraud
         creditors of the Borrower or the creditors of any other person or
         entity;

         23.      TIME IS OF THE ESSENCE; MONETARY AND NON-MONETARY DEFAULTS. It
is understood by Borrower that time is of the essence hereof in connection with
all obligations of Borrower herein and any of the other Loan Documents.

         Lender, at its sole option, may declare the Loan, as well as all other
monies secured or evidenced hereby or by any of the other Loan Documents,
including, without limitation, all Prepayment Premiums (to the extent permitted
by the Laws of the State) and late payment charges, to be in default and
forthwith due and payable, in the event:

                           (1)      Borrower defaults in the payment of any
         monthly installment of the Note, whether of principal or interest, or
         both, or in the payment of any other sums of money referred to herein
         or in the Note, the Borrower Cross-Default Guaranty or in any of the
         other Loan Documents, promptly and fully when the same shall be due,
         without notice or demand from Lender to Borrower in regard to such
         Monetary Default (as hereinafter defined), and any such Monetary
         Default remains uncured for a period of five (5) days after Written
         Notice thereof has been given by Lender to Borrower, unless Lender has
         previously given Borrower such Written Notice for a failure to pay in
         the then-current Loan Year (as defined in the Note), in which event no
         such notice need be given and no right to cure need be afforded
         Borrower as to any further Monetary Default during such Loan Year.

                           (2)      Borrower breaches or defaults on any of the
         terms, covenants, conditions and agreements of the Note, the Borrower
         Cross-Default Guaranty, this Mortgage, or any other Loan Documents; or
         in the event that each and every one of said terms, covenants,
         conditions and agreements is not otherwise either duly, promptly and
         fully discharged or performed, and any such Non-Monetary Default (as
         hereinafter defined) remains uncured for a period of thirty (30) days
         after Written Notice thereof has been delivered from Lender to
         Borrower; unless such Non-Monetary Default cannot be cured within said
         thirty (30) day period, in which event Borrower shall have a reasonable
         period of time to complete cure, provided that action to cure such
         Non-Monetary Default is promptly commenced within said thirty (30) day
         period, and Borrower is, in Lender's sole judgment, not diminishing or
         impairing the value of the Property, and is diligently pursuing a cure
         to completion, but in no event longer than ninety (90) days.

                           (3)      Any representation or warranty of Borrower
         or of its members, general partners, principals, affiliates, agents or
         employees, or of any Guarantor made

                                                                 Omaha, Nebraska

                                       26


         herein or in or in any other Loan Document, in any guaranty, or in any
         certificate, report, financial statement or other instrument or
         document furnished to Lender shall have been false or misleading in any
         material respect when made.

                           (4)      Any seizure or forfeiture of the Property,
         or any portion thereof, or Borrower's interest therein, resulting from
         criminal wrongdoing or other unlawful action of Borrower, its
         affiliates, or any tenant in the Property under any federal, state or
         local law.

                           (5)      If Borrower consummates a transaction which
         would cause this Mortgage or Lender's exercise of its rights under this
         Mortgage, the Note or the other Loan Documents to constitute a
         nonexempt prohibited transaction under ERISA or result in a violation
         of a state statute regulating governmental plans, subjecting Lender to
         liability for a violation of ERISA or a state statute.

                           (6)      Any default occurs in the performance of any
         covenant or obligation of Borrower or any other party under any
         indemnity or guaranty delivered to Lender in connection with the Loan
         and such default continues beyond the expiration of applicable notice
         and cure periods.

                           (7)      Any default occurs under any Affiliate Loan
         which default continues beyond the expiration of applicable notice and
         cure periods.

         Upon the occurrence of any one of the above events, and at the option
of Lender, the principal of and the interest accrued on the Loan and all other
sums secured by this Mortgage and the other Loan Documents shall immediately
become due and payable as if all of said sums of money were originally
stipulated to be paid on such day. In addition, Lender may avail itself of all
rights and remedies provided by law or equity, and may foreclose or prosecute a
suit at law or in equity as if all monies secured hereby had matured prior to
its institution, anything in this Mortgage or any of the other Loan Documents to
the contrary notwithstanding. Lender shall have no obligation to give Borrower
notice of, or any period to cure, any Monetary Default or any Incurable Default
(as hereinafter defined) prior to exercising its rights, powers, privileges and
remedies.

         As used herein, the term "MONETARY DEFAULT" shall mean any default
which can be cured by the payment of money such as, but not limited to, the
payment of principal and interest due under the Note, or the payment of taxes,
assessments and insurance premiums when due as provided in this Mortgage. As
used herein, the term "NON-MONETARY DEFAULT" shall mean any default that is not
a Monetary Default or an Incurable Default. As used herein, the term "INCURABLE
DEFAULT" shall mean either: (i) any voluntary or involuntary sale, assignment,
mortgaging, encumbering or transfer in violation of the covenants contained
herein or any of the other Loan Documents; or (ii) if Borrower, or any person or
entity comprising

                                                                 Omaha, Nebraska

                                       27


Borrower or any guarantor or indemnitor of the Loan, should breach any of the
provisions of Section 22.

         24.      FORECLOSURE. Upon the occurrence of a default hereunder,
Lender may institute an action to foreclose this Mortgage as to the amount so
declared due and payable, and thereupon the Property (or any portion thereof)
shall be sold according to law to satisfy and pay the same, together with all
costs, expenses and allowances thereof, including, without limitation,
Reasonable Attorneys' Fees. The Property may be sold in one parcel, several
parcels or groups of parcels, and Lender shall be entitled to bid at the sale,
and, if Lender is the highest bidder for the Property or any part or parts
thereof, Lender shall be entitled to purchase the same. The failure or omission
on the part of Lender to exercise the option for acceleration of maturity of the
Note and foreclosure of this Mortgage following any default as aforesaid or to
exercise any other option or remedy granted hereunder to Lender when entitled to
do so in any one or more instances, or the acceptance by Lender of partial
payment of the Loan, whether before or subsequent to Borrower's default
hereunder, shall not constitute a waiver of any such default or the right to
exercise any such option or remedy, but such option or remedy shall remain
continuously in force. Acceleration of the maturity of the Note, once claimed
hereunder by Lender, at the option of Lender, may be rescinded by written
acknowledgment to that effect by Lender, but the tender and acceptance of
partial payments alone shall not in any way either affect or rescind such
acceleration of maturity, nor act as a waiver, accord and satisfaction,
modification, novation or similar defense.

         25.      UCC REMEDIES.

                  (a)      This Mortgage constitutes a Security Agreement under
the UCC with respect to any part of the Property that may or might now or
hereafter be or be deemed to be personal property, fixtures or property other
than real estate, 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:

                           (1)      No financing statement covering any of the
         Property or any proceeds thereof is on file in any public office; and
         Borrower will, at its cost and expense, upon demand, furnish to Lender
         such further information and will execute and deliver to Lender such
         financing statements and other documents in form reasonably
         satisfactory to Lender and will do all such acts and things as Lender
         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 Property as security for the Loan,
         subject to no adverse liens or encumbrances; and Borrower 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 Lender to be necessary or
         desirable;

                                                                 Omaha, Nebraska

                                       28


                           (2)      The terms and provisions contained in this
         section and in Section 24(b) of this Mortgage shall, unless the context
         otherwise requires, have the meanings and be construed as provided in
         the Code;

                           (3)      This Mortgage constitutes a security
         agreement and financing statement under the UCC with respect to the
         Property. As such, this Mortgage covers any portion of the Property
         that is personal property including all items which are to become
         fixtures. Borrower is the "Debtor" and Lender is the "Secured Party"
         (as those terms are defined and used in the UCC) insofar as this
         Mortgage constitutes a financing statement.

                  (b)      Upon the occurrence of a default, Lender may exercise
its rights of enforcement with respect to the Fixtures and Personal Property
under the UCC, and in conjunction with, in addition to or in substitution for
those rights and remedies:

                           (1)      Written Notice mailed to Borrower as
         provided herein ten (10) days prior to the date of public sale of the
         Fixtures and Personal Property or prior to the date after which private
         sale of the Fixtures and Personal Property will be made shall
         constitute reasonable notice;

                           (2)      any sale made pursuant to the provisions of
         this Section shall be deemed to have been a public sale conducted in a
         commercially reasonable manner if held contemporaneously with the sale
         of the Mortgaged Property under power of sale as provided herein upon
         giving the same notice with respect to the sale of the Fixtures and
         Personal Property hereunder as is required for such sale of the
         Mortgaged Property under power of sale;

                           (3)      in the event of a foreclosure sale, whether
         made under the terms hereof, or under judgment of a court, the Fixtures
         and Personal Property and the Mortgaged Property may, at the option of
         Lender, be sold as a whole;

                           (4)      it shall not be necessary that Lender take
         possession of the Fixtures and Personal Property or any part thereof
         prior to the time that any sale pursuant to the provisions of this
         Section is conducted and it shall not be necessary that the Fixtures
         and Personal Property or any part thereof be present at the location of
         such sale;

                           (5)      prior to application of proceeds of
         disposition of the Fixtures and Personal Property to the secured
         indebtedness, such proceeds shall be applied to the reasonable expenses
         of retaking, holding, preparing for sale or lease, selling, leasing and
         the like and the Reasonable Attorneys' Fees and other legal expenses
         incurred by Lender;

                                                                 Omaha, Nebraska

                                       29


                           (6)      any and all statements of fact or other
         recitals made in any bill of sale or assignment or other instrument
         evidencing any foreclosure sale hereunder as to nonpayment of the
         indebtedness or as to the occurrence of any default, or as to Lender
         having declared all of such indebtedness to be due and payable, or as
         to notice of time, place and terms of sale and of the properties to be
         sold having been duly given, or as to any other act or thing having
         been duly done by Lender, shall be taken as prima facie evidence of the
         truth of the facts so stated and recited;

                           (7)      Lender may appoint or delegate any one or
         more persons as agent to perform any act or acts necessary or incident
         to any sale held by Lender, including the sending of notices and the
         conduct of the sale, but in the name and on behalf of Lender; and

                           (8)      this Mortgage covers Goods which are or are
         to become Fixtures related to the Real Property, and covers
         As-Extracted Collateral related to the Real Property. A carbon,
         photographic or other reproduction of this Mortgage or of any financing
         statement relating to this Mortgage shall be sufficient as a financing
         statement. This Mortgage shall be effective as a financing statement
         filed as a fixture filing with respect to all fixtures included within
         the Property and is to be filed for record in the real estate records
         in the Office of the County Clerk where the Property (including said
         fixtures) is situated. This Mortgage shall also be effective as a
         financing statement As-Extracted Collateral with respect to all
         As-Extracted Collateral included within the Real Property (including,
         without limitation, all oil, gas, other minerals, and other substances
         of value which may be extracted from the earth and all accounts arising
         out of the sale at the wellhead or minehead thereof), and is to be
         filed for record in the real estate records of the county where the
         Property is situated. The mailing address of Borrower is set forth in
         Section 43 of this Mortgage and the address of Lender from which
         information concerning the security interest may be obtained is the
         address of Lender set forth in Section 43 of this Mortgage.

         26.      PROTECTION OF LENDER'S SECURITY. At any time after default
hereunder, Lender, or Lender's agents or contractors, is authorized, without
notice and in Lender's sole discretion, to enter upon and take possession of the
Property or any part thereof, and to perform any acts which Lender deems
necessary or proper to conserve the security interest herein intended to be
provided by the Property, to operate any business or businesses conducted
thereon, and to collect and receive all Rents thereof and therefrom, including
those past due as well as those accruing thereafter.

         27.      APPOINTMENT OF RECEIVER. If, at any time after a default
hereunder, Lender deems, in Lender's sole discretion, that a receivership may be
necessary to protect the Property or its Rents, whether before or after maturity
of the Note and whether before or at the time of or after the institution of
foreclosure or suit to collect the Loan or to enforce this

                                                                 Omaha, Nebraska

                                       30


Mortgage or any of the other Loan Documents, Lender, as a matter of strict right
and regardless of the value of the Property or the amounts due hereunder or
secured hereby, or of the solvency of any party bound for the payment of such
indebtedness, shall have the right, upon ex parte application and without notice
to anyone, and by any court having jurisdiction, to the appointment of a
receiver to take charge of, manage, preserve, protect and operate the Property,
to collect the Rents thereof, to make all necessary and needful repairs, and to
pay all taxes, assessments, insurance premiums and other such charges against
and expenses of the Property, and to do such other acts as may by such court be
authorized and directed, and after payment of the expenses of the receivership
and the management of the Property, to apply the net proceeds of such
receivership in reduction of the Loan or in such other manner as the said court
shall direct notwithstanding the fact that the amount owing thereon may not then
be due and payable or the said Loan is otherwise adequately secured. Such
receivership shall, at the option of Lender, continue until full payment of all
sums hereby secured or until title to the Property shall have passed by sale
under this Mortgage. Borrower hereby specifically waives its right to object to
the appointment of a receiver as aforesaid, and hereby expressly agrees that
such appointment shall be made as an admitted equity and as a matter of absolute
right to Lender.

         28.      RIGHTS AND REMEDIES CUMULATIVE; FORBEARANCE NOT A WAIVER. The
rights and remedies herein provided are cumulative, and Lender, as the holder of
the Note and of every other obligation secured hereby, may recover judgment
thereon, issue execution therefor and resort to every other right or remedy
available at law or in equity, without first exhausting any right or remedy
available to Lender and without affecting or impairing the security of any right
or remedy afforded hereby, and no enumeration of special rights or powers by any
provisions hereof shall be construed to limit any grant of general rights or
powers, or to take away or limit any and all rights granted to or vested in
Lender by law or equity. Borrower further agrees that no delay or omission on
the part of Lender to exercise any rights or powers accruing to it hereunder
shall impair any such right or power, or shall be construed to be a waiver of
any such default hereunder or an acquiescence therein; and every right, power
and remedy granted herein or by law or equity to Lender may be exercised from
time to time as often as Lender deems expedient.

         Lender may resort to any security given by this Mortgage or to any
other security now existing or hereafter given to secure the payment of the
Loan, in whole or in part, and in such portions and in such order as may seem
best to Lender in its sole discretion, and any such action shall not be
considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage. To the full extent Borrower may do so,
Borrower agrees that Borrower will not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force pertaining to
the rights and remedies of sureties or providing for any appraisement,
valuation, stay, extension or redemption, and Borrower, for Borrower and
Borrower's heirs, devisees, representatives, successors and assigns, and for any
and all persons ever claiming any interest in the Property, to the extent
permitted by law, hereby

                                                                 Omaha, Nebraska

                                       31


waives and releases all rights of redemption, valuation, appraisement, stay of
execution, notice of intention to mature or declare due the whole of the secured
indebtedness, notice of election to mature or declare due the whole of the
secured indebtedness and all rights to a marshaling of the assets of Borrower,
including the Property, or to a sale in inverse order of alienation in the event
of foreclosure of the liens and security interests hereby created. Borrower
shall not have or assert any right under any statute or rule of law pertaining
to the marshaling of assets, sale in inverse order of alienation, the exemption
of homestead, the administration of estates of decedents or other matters
whatever to defeat, reduce or affect the right of Lender under the terms of this
Mortgage to a sale of the Property for the collection of the secured
indebtedness without any prior or different resort for collection, or the right
of Lender under the terms of this Mortgage to the payment of such indebtedness
out of the proceeds of sale of the Property in preference to every other
claimant whatever. If any law referred to in this Section and now in force, of
which Borrower or Borrower's heirs, devisees, representatives, successors and
assigns and such other persons claiming any interest in the Property might take
advantage despite this Section, shall hereafter be repealed or cease to be in
force, such law shall not thereafter be deemed to preclude the application of
this Section.

         29.      MODIFICATION NOT AN IMPAIRMENT OF SECURITY. Lender, without
notice and without regard to the consideration, if any, paid therefor, and
notwithstanding the existence at that time of any inferior mortgages, deeds of
trust, or other liens thereon, may release any part of the security described
herein, or may release any person or entity liable for the Loan without in any
way affecting the priority of this Mortgage, to the full extent of the Loan
remaining unpaid hereunder, upon any part of the security not expressly
released. Lender may, at its option and within Lender's sole discretion, also
agree with any party obligated on the Loan, or having any interest in the
security described herein, to extend the time for payment of any part or all of
the Loan, and such agreement shall not, in any way, release or impair this
Mortgage, but shall extend the same as against the title of all parties having
any interest in said security, which interest is subject to this Mortgage.

         30.      PROPERTY MANAGEMENT AND LEASING. The exclusive manager of the
Property shall be Borrower, or such other manager as may be first approved in
writing by Lender. The exclusive leasing agent of the Property, if other than
Borrower or the foregoing party, shall be first approved in writing by Lender.
The management and leasing contracts (or in the absence of any such written
contract, a letter so stating and further identifying the name of the person or
entity charged with the responsibility for managing and/or leasing the Property)
shall be subordinate to this Mortgage, and satisfactory to and subject to the
prior written approval of Lender throughout the term of the Loan. Upon default
in either of these requirements, then the whole of the Loan hereby secured
shall, at the election of Lender, become immediately due and payable, together
with any Prepayment Premium, late payment charges and all other sums required by
the Note or the other Loan Documents, and Lender shall be entitled to exercise
any or all remedies provided for or referenced in this Mortgage.

                                                                 Omaha, Nebraska

                                       32


         31.      MODIFICATION NOT A WAIVER. In the event Lender (a) releases,
as aforesaid, any part of the security described herein or any person or entity
liable for the Loan; (b) grants an extension of time for the payment of the
Note; (c) takes other or additional security for the payment of the Note; or (d)
waives or fails to exercise any rights granted herein, in the Note, or any of
the other Loan Documents, any said act or omission shall not release Borrower,
subsequent purchasers of the Property or any part thereof, or makers, sureties,
endorsers or guarantors of the Note, if any, from any obligation or any covenant
of this Mortgage, the Note or any of the other Loan Documents, nor preclude
Lender from exercising any right, power or privilege herein granted or intended
to be granted in the event of any other default then made, or any subsequent
default.

         32.      TRANSFER OF PROPERTY OR CONTROLLING INTEREST IN BORROWER;
ASSUMPTION. Except as set forth in Section 38(b) hereof, without the prior
written consent of Lender, the sale, transfer, assignment or conveyance of all
or any portion of the Property, or the transfer, assignment or conveyance of a
controlling interest in Borrower or its general partner or managing member, or
any guarantor, whether voluntary or by operation of law, without the prior
written consent of Lender, shall constitute a default hereunder, and entitle
Lender, at Lender's sole option, to accelerate all sums due on the Note,
together with any Prepayment Premiums (to the extent permitted by the Laws of
the State), late payment charges or any other amounts secured hereby. Lender
may, however, elect to waive the option to accelerate granted hereunder if,
prior to any such sale, transfer, assignment or conveyance of the Property, the
following conditions shall be fully satisfied: (a) Lender acknowledges in
writing that, in Lender's sole discretion, the creditworthiness of the proposed
transferee and the ability and experience of the proposed transferee to operate
the Property are satisfactory to Lender, (b) Lender and the proposed transferee
shall enter into an agreement in writing that (i) the rate of interest payable
on the Loan shall be at such rate as Lender shall determine, (ii) the repayment
schedule as set forth in the Note shall be modified by Lender, in Lender's sole
discretion, to initiate amortization or modify the existing amortization
schedule in order to amortize the then remaining unpaid principal balance of the
Note over a period of time as determined by Lender, in Lender's sole discretion,
without a change in the maturity date of the Note, and (iii) the proposed
transferee shall assume all obligations of Borrower under the Note, this
Mortgage and the other Loan Documents in writing and an assumption fee, to be
determined by Lender in Lender's sole discretion, may be charged by Lender; (c)
Lender shall receive, for Lender's review and approval, copies of all transfer
documents; and (d) Borrower or the transferee shall pay all costs and expenses
in connection with such transfer and assumption, including, without limitation,
all fees and expenses incurred by Lender.

         Borrower, or any subsequent owner of the Property or any portion
thereof, shall do all things necessary to preserve and keep in full force and
effect its and their legal existence, franchises, rights and privileges as a
corporation, partnership or limited liability company, as the case may be, under
the laws of the State of its formation and its right to own property and
transact business in the State. It shall be a default hereunder if Borrower, or
any subsequent

                                                                 Omaha, Nebraska

                                       33


owner of the Property or any portion thereof, shall amend, modify, transfer,
assign or terminate the applicable governing documents for such entity,
including its partnership agreement, certificate of partnership, operating
agreement, articles of organization, regulations, articles of incorporation or
bylaws, as the case may be (as applicable, the "GOVERNING DOCUMENTS"), of
Borrower or such subsequent owner without the prior written consent of Lender.
Borrower, or such subsequent owner of the Property, shall provide Lender with
copies of any proposed amendment to its applicable Governing Documents, so that
Lender may, in Lender's sole discretion, determine whether such amendment
adversely affects Lender, the Property or the security value thereof. Provided,
however, that any amendment, modification, transfer, assignment or termination
of Borrower's applicable Governing Documents or any other action pursuant to
which the current general partner or managing member of Borrower shall either:
(i) cease to be the general partner or managing member of Borrower; or (ii)
except to the extent permitted herein, cease to own or maintain a partnership or
membership interest in Borrower equal to or greater than its partnership or
membership interest at the time this Mortgage is executed, shall be deemed to
have a material adverse effect upon Lender and the Property, and shall be a
default hereunder.

         Borrower shall not change its name or identity in any manner which may
make any financing or continuation statement filed in connection with the Loan
seriously misleading within the meaning of the UCC enacted in the State or
change its jurisdiction of organization unless Borrower shall have delivered to
Lender written notice thereof not less than 30 days before the effective date of
such change and shall have taken all action which Lender determines to be
reasonably necessary or desirable to confirm and protect Lender's security
interests and rights under this Mortgage and the perfection and priority
thereof. Borrower will not change its principal places of business unless it
shall have given Lender prior written notice of its intent to do so not less
than thirty (30) days in advance of the effective date of such change. Borrower
shall bear all costs incurred by Lender in connection with any such change
including, without limitation, Reasonable Attorney's Fees.

         In the event the ownership of the Property, or any part thereof, shall
become vested in a person or entity other than Borrower, whether with or without
the prior written consent of Lender, Lender may, without notice to Borrower,
deal with such successor or successors in interest with reference to the
Property, this Mortgage and the other Loan Documents, in the same manner and to
the same extent as with Borrower without in any way vitiating or discharging
Borrower's liability hereunder or under any of the Loan Documents. No sale,
transfer or conveyance of the Property, no forbearance on the part of Lender and
no extension of time given by Lender to Borrower for the payment of the Note
shall operate to release, discharge, modify, change or affect the original
liability of Borrower, either in whole or in part, unless expressly set forth in
writing executed by Lender. Notwithstanding anything contained herein to the
contrary, Borrower hereby waives any right it now has or may hereafter have to
require Lender to prove an impairment of its security as a condition to the
exercise of Lender's rights under this Section 32.

                                                                 Omaha, Nebraska

                                       34


         A sale, transfer, assignment or conveyance within the meaning of this
Section shall be deemed to include, but not be limited to, (a) an installment
sales agreement wherein Borrower agrees to sell the Property or any part thereof
for a price to be paid in installments; (b) an agreement by Borrower leasing all
or a substantial part of the Property for other than actual occupancy by a
tenant under an Occupancy Lease or a sale, assignment or other transfer of, or
the grant of a security interest in, Borrower's right, title and interest in and
to any leases or any Rents; (c) if Borrower, any guarantor, any indemnitor, or
any general partner or managing member of Borrower, is a corporation, the
voluntary or involuntary sale, conveyance, transfer or pledge of such
corporation's stock (or the stock of any corporation directly or indirectly
controlling such corporation by operation of law or otherwise), or the creation
or issuance of new stock by which an aggregate of more than ten percent (10%) of
such corporation's stock shall be vested in a party or parties who are not now
stockholders; and (d) if Borrower, any guarantor, indemnitor, or any general
partner or managing member of Borrower, is a limited partnership, general
partnership, limited liability partnership, limited liability company, or joint
venture, the change, removal or resignation of a general partner, managing
partner, or member, or the transfer or pledge of the interest of any general
partner, managing partner, or member or any profits or proceeds relating to such
interest. Nothing in this Mortgage shall be construed to limit or restrict the
transfer of shares of Agree Realty Corporation.

         Notwithstanding anything contained in this Section 32 to the contrary,
as long as no default, or event which, with notice or the passage of time or
both, could result in a default, has occurred hereunder, under the Note or any
of the other Loan Documents, Lender shall permit one (1) bona fide arm's length
transfer of the Property to another borrowing entity without a change in the
terms of the Loan; provided, however, that no such transfer shall be valid or
permitted hereunder unless: (i) Lender receives prior Written Notice of such
proposed transfer; (ii) such proposed transferee and any substitute guarantor
has been approved in writing by Lender (taking into consideration such factors
as transferee's creditworthiness, business experience, financial condition and
managerial capabilities); (iii) the transferee's (and its sole general partner's
or managing member's) single purpose and bankruptcy remote character are
satisfactory to Lender in its sole discretion; (iv) Lender has obtained such
other legal opinions regarding substantive consolidation issues, enforceability
of the assumption documents, no adverse impact on the Securities or any REMIC
holding the Note and similar matters as Lender may require, (v) the execution
and delivery to Lender of a written assumption agreement covering the Note this
Mortage, the Borrower Cross-Default Guaranty and the other Loan Documents and/or
substitute guaranty (in Lender's sole and absolute discretion) and such
modifications to the Loan Documents executed by such parties and containing such
terms and conditions as Lender may require in its sole and absolute discretion
prior to such sale or transfer (provided that in the event the Loan is included
in a REMIC and is a performing Loan, no modification to the terms and conditions
shall be made or permitted that would cause (A) any adverse tax consequences to
the REMIC or any holders of any Mortgage-Backed Pass-Through Securities, (B)
this Mortgage to fail to be a Qualifying

                                                                 Omaha, Nebraska

                                       35


Security Instrument under applicable federal law relating to REMIC's, or (C)
result in a taxation of the income from the Loan to the REMIC or cause a loss of
REMIC status), (vi) if applicable, the delivery to Lender of an endorsement (at
Borrower's sole cost and expense) to Lender's policy of title insurance then
insuring the lien created by this Mortgage in form and substance acceptable to
Lender in its sole judgment; (vii) Lender is paid a cash assumption fee in
accordance with the following schedule: Two percent (2%) of the then outstanding
principal balance of the Note if such outstanding principal balance is less than
or equal to Three Million Dollars ($3,000,000.00), one and one-half percent (1
1/2%) of the then outstanding principal balance of the Note if such outstanding
principal balance is in excess of Three Million Dollars ($3,000,000.00); (viii)
Borrower pays all fees and expenses incurred by Lender in connection with such
transfer and assumption, including, without limitation, inspection and
investigation fees, title insurance charges, and Reasonable Attorneys' Fees;
(ix) Lender approves the management agreement and leasing agreement, and the
management and leasing company to be employed by the proposed transferee and (x)
the transferee is simultaneously purchasing each of the Properties which secure
the Affiliate Loans, to the extent such Affiliate Loans remain outstanding. Any
transfer of all or any portion of the Property which does not strictly comply
with the terms and conditions of the foregoing shall be a default hereunder, and
shall entitle Lender to exercise all rights and remedies provided in this
Mortgage and the other Loan Documents. This one-time right of transfer shall
apply to the Borrower named herein and not to any subsequent owner of the
Property.

         33.      FURTHER ENCUMBRANCE PROHIBITED; SUBROGATION. So long as the
Note remains unpaid, Borrower shall not, either voluntarily or involuntarily,
permit the Property or any part thereof to become subject to any secondary or
subordinate lien, mortgage, deed of trust, security interest or encumbrance of
any kind whatsoever without the prior written consent of Lender, and the
imposition of any such secondary lien, mortgage, deed of trust, security
interest or encumbrance without the approval of Lender shall constitute a
default hereunder, and entitle Lender, at Lender's sole option, to declare the
outstanding principal balance of the Note, all accrued and unpaid interest
thereon, Prepayment Premiums (to the extent permitted by the laws of the State,
late payment charges and any other amounts secured hereby to be and become
immediately due and payable in full. In the event that Lender shall hereafter
give its written consent to the imposition of any such secondary lien, mortgage,
deed of trust, security interest or other encumbrance upon the Property, Lender,
at Lender's sole option, shall be entitled to accelerate the maturity of the
Note and exercise any and all remedies provided and available to Lender
hereunder and in the other Loan Documents in the event that the holder of any
such secondary lien or encumbrance shall institute foreclosure or other
proceedings to enforce the same; it being understood and agreed that a default
under any instrument or document evidencing, securing or secured by any such
secondary lien or encumbrance shall be and constitute a default hereunder. In
the event all or any portion of the proceeds of the Loan are used for the
purpose of retiring debt or debts secured by prior liens on the Property, Lender
shall be subrogated to the rights and lien priority of the holder or holders of
the lien or liens so discharged.

                                                                 Omaha, Nebraska

                                       36


         34.      CONVEYANCE OF MINERAL RIGHTS PROHIBITED. Borrower agrees that
the making of any oil, gas or mineral lease, or the sale or conveyance of any
mineral interest or right to explore for minerals under, through or upon the
Property, would impair the value of the Property, and that Borrower shall have
no right, power or authority to lease the Property, or any part thereof, for
oil, gas or other mineral purposes, or to grant, assign or convey any mineral
interest of any nature, or the right to explore for oil, gas and other minerals,
without first obtaining Lender's express written permission therefor, which
permission shall not be valid until recorded among the Public Records of the
county in which the Property is located. Borrower further agrees that if
Borrower shall make, execute, or enter into any such lease or attempt to grant
any such mineral rights without such prior written permission of Lender, then
Lender shall have the option, without notice, to declare the same to be a
default hereunder, and to declare the Loan immediately due and payable in full.
Whether or not Lender shall consent to such lease or grant of mineral rights,
Lender shall receive the entire consideration to be paid for any such lease or
grant of mineral rights, with the same to be applied to the Loan notwithstanding
the fact that the amount owing thereon may not then be due and payable or that
the Loan is otherwise adequately secured; provided, however, that the acceptance
of such consideration shall in no way impair the lien of this Mortgage on the
Property or cure any existing Monetary Default.

         35.      ESTOPPEL CERTIFICATION BY BORROWER. Borrower, upon request of
Lender therefor made either personally or by mail, shall certify in writing to
Lender (or any party designated by Lender), in a form satisfactory to Lender or
such designee, the amount of principal and interest then outstanding under the
terms of the Note and any other sums due and owing under this Mortgage or any of
the other Loan Documents, and whether any offsets or defenses exist against the
Loan. Such certification shall be made by Borrower within ten (10) days if the
request is made personally, or within twenty (20) days if the request is made by
mail.

         36.      CROSS-DEFAULT. The Note is also secured by the terms,
conditions and provisions of the Assignment, by three Cross-Default Guaranty
Agreements of even date herewith from Agree - Milestone Center Project, L.L.C.,
a Delaware limited liability company, as guarantor for the Agree-Milestone Loan;
Agree - Columbia Crossing Project, L.L.C., a Delaware limited liability company,
as guarantor for the Agree-Columbia Loan; and Oklahoma City, respectively in
favor of Lender (hereinafter individually or collectively referred to as the
"AFFILIATED-BORROWER CROSS-DEFAULT GUARANTYS") and, additionally, may be secured
by contracts or agreements of guaranty or other security instruments. The terms,
covenants, conditions and agreements of each security instrument shall be
considered a part hereof as fully as if set forth herein verbatim. Any default
under this Mortgage, any Affiliated Borrower Cross-Default Guaranty or any of
the other Loan Documents shall constitute a default hereunder and under each of
the other Loan Documents. Notwithstanding the foregoing, the enforcement or
attempted enforcement of this Mortgage or any of the other Loan Documents now or
hereafter held by Lender shall not prejudice or in any manner affect

                                                                 Omaha, Nebraska

                                       37


the right of Lender to enforce any other Loan Document; it being understood and
agreed that Lender shall be entitled to enforce this Mortgage and any of the
other Loan Documents now or hereafter held by it in such order and manner as
Lender, in its sole discretion, shall determine.

         37.      EXAMINATION OF BORROWER'S RECORDS. Borrower will maintain
complete and accurate books and records showing in detail the income and
expenses of the Property, and will permit Lender and its agents, contractors or
representatives to examine said books and records and all supporting vouchers
and data during normal business hours and from time to time upon request by
Lender, in such place as such books and records are customarily kept. Borrower
will furnish to Lender, within one hundred twenty (120) days after the close of
each respective fiscal period annual and quarterly financial statements (income
statements and a balance sheet) for the Borrower and the Property. Borrower will
furnish to Lender on or before 45 calendar days after the end of each calendar
quarter the following items, each certified by Borrower as being true and
correct, in such format and in such detail as Lender or its servicer may
request: (a) a written statement (rent roll) dated as of the last day of each
such calendar quarter identifying each of the Occupancy Leases by the term,
space occupied, rental required to be paid (including percentage rents and
tenant sales), security deposit paid, any rental concessions, all rent
escalations, any rents paid more than one month in advance, any special
provisions or inducements granted to tenants, any taxes, maintenance and other
common charges paid by tenants, all vacancies and identifying any defaults or
payment delinquencies thereunder; and (b) quarterly and year-to-date operating
statements prepared for each calendar quarter during each such reporting period
detailing the total revenues received, total expenses incurred, total cost of
all capital improvements, total debt service and total cash flow. These
statements shall be in form acceptable to Lender and its servicer, shall be
prepared in accordance with generally accepted accounting principles, and shall
include a rent roll, certified as true and correct by Borrower. The statements
shall show in detail all income derived from and expenses incurred in connection
with the ownership of the Property, including current annual sales figures for
all Major Tenants of the Property if required under the Major Tenant leases or
if such financial information is otherwise available. Borrower shall deliver to
Lender, for Borrower, or any entity with whom Borrower's tax return is
consolidated, copies of all income tax returns, requests for extension and other
similar items contemporaneously with its delivery of same to the Internal
Revenue Service. In the event Borrower fails to provide such statements to
Lender within the time prescribed above, Borrower shall pay Lender the sum of
$200.00 in administrative expenses for each successive month for which the
statements are delinquent (or in the case of such statements to be delivered
prior to the transfer of the Loan to Investor (hereafter defined), for each
successive week for which the statements are delinquent). Upon a default
hereunder, Lender shall have the right to require that said financial statements
be audited and certified by a certified public accountant acceptable to Lender,
at the sole cost and expense of Borrower.

                                                                 Omaha, Nebraska

                                       38


         Prior to the transfer of the Loan to Investor by Lender, Borrower shall
deliver to Lender the reports required above on a monthly basis. Such reports
shall be delivered within ten calendar days after the end of each calendar
month.

         In addition, at the request of Lender, but in no case more often than
once a quarter nor more than three (3) times during the term of the Loan, unless
a default has occurred, Borrower shall furnish to Lender (i) unaudited financial
statements (balance sheet, income statement, cash flow statement and current
rent roll) covering operation of the Property for periods other than those set
forth in the preceding paragraph and (ii) unaudited financial statements
(balance sheets, income statements, and cash flow statements) for Borrower, its
general partner(s), shareholder(s) or member(s) (whichever is applicable) and
for such other principals of Borrower as designated by Lender, provided that for
so long as the Property is held by Borrower such statements shall be required
only for Borrower and Agree Realty Corporation. All such statements shall be
certified to Lender to be complete, correct, and accurate by the individual (for
an individual's statements) or by an authorized representative of the entity (if
statements are for a partnership, corporation or limited liability company).

         Any inspection or audit of the Property or the books and records of
Borrower, or the procuring of documents and financial and other information, by
or on behalf of Lender, shall be at Borrower's expense and shall be for Lender's
protection only, and shall not constitute any assumption of responsibility or
liability by Lender to Borrower or anyone else with regard to the condition,
construction, maintenance or operation of the Property, nor Lender's approval of
any certification given to Lender nor relieve Borrower of any of Borrower's
obligations.

         38.      ALTERATION, REMOVAL AND CHANGE IN USE OF PROPERTY PROHIBITED.
Borrower covenants and agrees to permit or suffer none of the following without
the prior written consent of Lender:

                  (a)      Any structural alteration of, or addition to, the
Improvements now or hereafter situated upon the Real Property, or the addition
of any new buildings or other structure(s) thereto, other than the erection or
removal of non-load bearing interior walls or as may be permitted under the
Borders Lease, so long as the Borders Lease remains in effect; or

                  (b)      The removal, transfer, sale or lease of the Property,
except that the removal, replacement or substitution of fixtures, equipment,
machinery, apparatus and articles of personal property (replacement or
substituted items must be of like or better quality than the removed items in
their original condition) encumbered hereby may be made in the normal course of
business; or

                  (c)      The use of any of the Improvements now or hereafter
situated on the Real Property for any purpose other than the Existing Use and
related facilities, or as may be permitted under the Borders Lease, so long as
the Borders Lease remains in effect.

                                                                 Omaha, Nebraska

                                       39


         39.      FUTURE ADVANCES SECURED. This Mortgage shall secure not only
existing indebtedness, but also future advances, whether such advances are
obligatory or to be made at the option of Lender. Upon the request of Borrower,
and at Lender's option prior to release of this Mortgage, Lender may make future
advances to Borrower. All future advances with interest thereon shall be secured
by this Mortgage to the same extent as if such future advances were made on the
date of the execution of this Mortgage unless the parties shall agree otherwise
in writing, but the total secured indebtedness shall not exceed at any one time
a maximum principal amount equal to double the face amount of the Note plus
interest and costs of collection, including court costs and Reasonable
Attorneys' Fees. Any advances or disbursements made for the benefit or
protection of or the payment of taxes, assessments, levies or insurance upon the
Property, with interest on such disbursements as provided herein, shall be added
to the principal balance of the Note and collected as a part thereof. To the
extent that this Mortgage may secure more than one note, a default in the
payment of any such mortgage note shall constitute a default in the payment of
all such notes.

         40.      EFFECT OF SECURITY AGREEMENT. Borrower agrees to, and shall
upon the request of Lender, execute and deliver to Lender, in form and content
satisfactory to Lender, such financing statements, descriptions of property and
such further assurances as Lender, in Lender's sole discretion, may from time to
time consider necessary to create, perfect, continue and preserve the lien and
encumbrances hereof, and the security interest granted herein, upon and in the
Property. Without the prior written consent of Lender, Borrower shall not create
or suffer to be created, pursuant to the UCC, any other security interest in
such real and personal property and fixtures described herein. Upon the
occurrence of a default hereunder or Borrower's breach of any other covenants or
agreements between the parties entered into in conjunction herewith, Lender
shall have the remedies of a secured party under the UCC as provided in Section
25, and at Lender's option, the remedies provided for in this Mortgage and the
other Loan Documents. Lender, at the expense of Borrower, may cause such
statements, descriptions and assurances, as herein provided in this Section 40,
and this Mortgage, to be recorded and re-recorded, filed and refiled, at such
times and in such places as may be required or permitted by law to so create,
perfect and preserve the lien and encumbrance hereof upon all of the Property.

         41.      TERMS OF APPLICATION SURVIVE CLOSING. The terms and provisions
of the Application for Mortgage Loan dated August 28, 2003, and any subsequent
amendments thereto (the "APPLICATION"), executed by and between Borrower and
Lender, are incorporated herein by reference. All terms, covenants, conditions
and agreements of the Application not expressly set forth in this Mortgage and
any of the other Loan Documents shall survive the execution and delivery hereof,
and remain in full force and effect. In the event any conflict exists between
the terms, covenants, conditions and agreements of the Application and the Loan
Documents, the terms, covenants, conditions and agreements of the Loan Documents
shall prevail.

                                                                 Omaha, Nebraska

                                       40


         42.      SUCCESSORS AND ASSIGNS; TERMINOLOGY. The provisions hereof
shall be binding upon Borrower and the heirs, personal representatives,
trustees, successors and assigns of Borrower, and shall inure to the benefit of
Lender, its successors and assigns. Where more than one Borrower is named
herein, the obligations and liabilities of said Borrower shall be joint and
several.

         Wherever used in this Mortgage, unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein: (a) the word
"Borrower" shall mean Borrower and/or any subsequent owner or owners of the
Property; (b) the word "Lender" shall mean Lender or any subsequent holder or
holders of this Mortgage; (c) the word "Trustee" shall mean Trustee or any
successor Trustee under this Mortgage; (d) the word "Note" shall mean the
Note(s) secured by this Mortgage; and (e) the word "person" shall mean an
individual, trustee, trust, corporation, partnership, limited liability
corporation, limited liability partnership, joint venture or unincorporated
association. As used herein, the phrase "Reasonable Attorneys' Fees" shall mean
fees charged by attorneys selected by Lender based upon such attorneys' then
prevailing hourly rates as opposed to any statutory presumption specified by any
statute then in effect in the State. As used herein words of any gender shall
include all other genders.

         43.      NOTICES. All notices, reports, requests or other written
instruments required or permitted hereunder, shall be in writing, signed by the
party giving or making the same, and shall be sent hand-delivered, effective
upon receipt, sent by United States Express Mail or by a nationally recognized
overnight courier, effective upon receipt, or sent by United States registered
or certified mail, postage prepaid, with return receipt requested, deemed
effective on the earlier of the day of actual delivery as shown by the
addressee's return receipt or the expiration of three business days after the
date of mailing, addressed to the party intended to receive the same at the
address set forth below or at such other address as shall be given in writing by
any party to another ("WRITTEN NOTICE"):

         If to Borrower:     OMAHA STORE NO. 166 L.L.C.
                             31850 Northwestern Highway
                             Farmington Hills, Michigan 48334
                             Attention:  Mr. Richard Agree

         If to Lender:       NATIONWIDE LIFE INSURANCE COMPANY
                             One Nationwide Plaza
                             Columbus, Ohio  43215-2220
                             Attention:  Real Estate Investment Department, 34T

         44.      GOVERNING LAW; WAIVER OF JURY TRIAL; SEVERABILITY. BORROWER
AND LENDER, EACH TO THE FULLEST EXTENT

                                                                 Omaha, Nebraska

                                       41


PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES HEREBY
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY TORT ACTION, AGAINST THE OTHER, ITS SUCCESSORS AND ASSIGNS,
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO OR IN CONNECTION WITH ANY
OF THE LOAN DOCUMENTS, THE LOAN OR ANY COURSE OF CONDUCT, ACT, OMISSION, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON
(INCLUDING, WITHOUT LIMITATION, EITHER PARTY'S DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH
EITHER), IN CONNECTION WITH THE LOAN OR THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, IN ANY COUNTERCLAIM WHICH ANY PARTY MAY BE PERMITTED TO ASSERT
THEREUNDER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IN NO EVENT SHALL
LENDER, ITS SUCCESSORS OR ASSIGNS BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING WITHOUT LIMITATION LOSS
OF BUSINESS PROFITS OR OPPORTUNITY) AND BY ITS EXECUTION HEREOF, BORROWER WAIVES
ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. This Mortgage and the rights and
obligations of the parties hereunder shall be governed by, and construed in
accordance with, the internal laws of the State, without regard to principles of
conflicts of laws. The parties hereto irrevocably (a) agree that any suit,
action or other legal proceeding arising out of or relating to this Mortgage may
be brought in a court of record in the State or in the courts of the United
States of America located in such State, (b) consent to the non-exclusive
jurisdiction of each such court in any suit, action or proceeding, and (c) waive
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. If any clauses or
provisions herein contained operate, or would prospectively operate, to
invalidate this Mortgage, then such clauses or provisions only shall be held for
naught, as though not herein contained, and the remainder of this Mortgage shall
remain operative and in full force and effect.

         45.      RIGHTS OF LENDER CUMULATIVE. The rights of Lender arising
under the terms, covenants, conditions and agreements contained in this Mortgage
shall be separate, distinct and cumulative, and none of them shall be in
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provisions,
anything herein or otherwise to the contrary notwithstanding. If Borrower is
comprised of more than one person or entity, then the liability of each such
person and entity hereunder shall be joint and several.

                                                                 Omaha, Nebraska

                                       42


         46.      MODIFICATIONS. This Mortgage cannot be changed, altered,
amended or modified except by an agreement in writing and in recordable form,
executed by both Borrower and Lender.

         47.      EXCULPATION. Notwithstanding anything contained herein to the
contrary, the liability of Borrower is subject to the limited recourse
provisions contained in the Exculpation section of the Note, which are
incorporated herein and made a part hereof by reference as if fully set forth
herein.

         48.      FULL RECOURSE. Notwithstanding any provisions in this Mortgage
to the contrary, including without limitation the provisions set forth in the
section captioned "Exculpation" hereinabove, Borrower shall be personally
liable, jointly and severally, for the entire Loan secured by this Mortgage
(including all principal, interest and other charges) in the event (a) Borrower
violates the covenant governing the placing of subordinate financing on the
Property as set forth in this Mortgage; (b) Borrower violates the covenant
restricting transfers of interests in the Property or transfers of ownership
interests in Borrower as set forth in this Mortgage; or (c) Borrower or any
guarantor violates the provisions of Section 22 of this Mortgage, or there is
filed against Borrower or any guarantor or indemnitor of the Loan, a petition in
bankruptcy or for the appointment of a receiver, or there commences under any
bankruptcy or insolvency law, proceedings for Borrower's relief, or for the
compromise, extension, arrangement or adjustment of Borrower's obligations which
is not dismissed within thirty (30) days after the filing of same.

         49.      LENDER IS NOT A JOINT VENTURER OR PARTNER. Borrower and Lender
acknowledge and agree that in no event shall Lender be deemed to be a partner or
joint venturer with Borrower or any member of Borrower. Without limitation of
the foregoing, Lender shall not be deemed to be a partner or joint venturer on
account of its becoming a mortgagee in possession or exercising any rights
pursuant to this Mortgage or pursuant to any other instrument or document
evidencing or securing any of the indebtedness secured hereby, or otherwise.

         50.      CAPTIONS. The captions set forth at the beginning of the
various Sections of this Mortgage are for convenience only, and shall not be
used to interpret or construe the provisions of this Mortgage.

         51.      SPLITTING OF MORTGAGE. This Mortgage and the Note shall, at
any time until the same shall be fully paid and satisfied, at the sole election
of Lender, be split or divided into two or more notes and two or more security
instruments, each of which shall cover all or a portion of the Property to be
more particularly described therein. To that end, Borrower, upon written request
of Lender, shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered by the then owner of the Property, to Lender and/or
its designee or designees substitute notes and security instruments in such
principal amounts,

                                                                 Omaha, Nebraska

                                       43


aggregating not more than the then unpaid principal amount of Loan, and
containing terms, provisions and clauses similar to those contained herein and
in the Note, and such other documents and instruments as may be required by
Lender.

         52.      REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any other Loan Document which is not of public record, and, in the case of
any such mutilation, upon surrender and cancellation of such Note or other Loan
Document, Borrower, at its expense, will issue, in lieu thereof, a replacement
Note or other Loan Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Loan Document in the same principal amount thereof and
otherwise of like tenor.

         53.      SOLE DISCRETION OF LENDER. Wherever pursuant to this Mortgage
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide that arrangements or terms are satisfactory
or not satisfactory shall be in the sole discretion of Lender and shall be final
and conclusive, except as may be otherwise expressly and specifically provided
herein.

         54.      TRANSFER OF LOAN.

                  (a)      Lender may, at any time, sell, transfer or assign the
Note, this Mortgage, the Assignment and the other Loan Documents, and any or all
servicing rights with respect thereto, or grant participations therein or issue
mortgage pass-through certificates or other securities evidencing a beneficial
interest in a rated or unrated public offering or private placement (the
"SECURITIES"), or otherwise sell the Loan or an interest therein (a "SECONDARY
MARKET TRANSACTION"). Lender may forward to each purchaser, transferee,
assignee, servicer, participant, investor in such Securities or in connection
with a Secondary Market Transaction or any Rating Agency rating such Securities
(collectively, the "INVESTOR") and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan
and to Borrower, any Guarantor and the Property, whether furnished by Borrower,
any Guarantor or otherwise, as Lender determines necessary or desirable.
Borrower acknowledges that certain information regarding the Loan and the
parties thereto and the Property may be included in a private placement
memorandum, prospectus or other disclosure documents. The term "RATING AGENCY"
shall mean each statistical rating agency that has assigned a rating to the
Securities.

                  (b)      Borrower shall cooperate in good faith with Lender in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements reasonably imposed by the participants
involved in any Secondary Market Transaction (including without limitation, a
Rating Agency and/or an Investor) including, without limitation, all structural
or other changes to the Loan, modifications to any documents

                                                                 Omaha, Nebraska

                                       44


evidencing or securing the Loan, delivery of opinions of counsel acceptable to
the Rating Agency or such Investors and addressing such matters as the Rating
Agency or such Investors may require; provided, however, that the Borrower shall
not be required to modify any documents evidencing or securing the Loan which
would modify (i) the interest rate payable under the Note, (ii) the stated
maturity of the Note, (iii) the amortization of principal of the Note, or (iv)
any other material terms or covenants of the Loan.

                  (c)      If Securities are issued in connection with the Loan
or a Secondary Market Transaction occurs with respect to the Loan, all Funds
held by Lender in escrow or pursuant to reserves in accordance with the Loan
Documents shall be deposited in "eligible accounts" at "eligible institutions"
and invested in "permitted investments" as then defined and required by any
Rating Agency.

         55.      COUNTERPARTS. This Mortgage may be executed in
several counterparts each of which when executed and delivered is an original,
but all of which together shall constitute one instrument.

         56.      SPECIAL STATE OF NEBRASKA PROVISIONS

         In the event of any inconsistencies between the terms and conditions of
this Article 56 and the other provisions of this Mortgage, the terms of this
Article 56 shall control and be binding.

                  (a)      APPOINTMENT OF SUCCESSOR TRUSTEE. Lender may, from
time to time, by a written instrument executed and acknowledged by Lender,
mailed to Borrower and recorded in the county in which the Real Property is
located and by otherwise complying with the provisions of the applicable law of
the State of Nebraska, substitute a successor or successors to the Trustee named
herein or acting hereunder.

                  (b)      REQUESTS FOR NOTICE. Borrower hereby requests a copy
of any Notice of Default and any Notice of Sale hereunder be mailed to Borrower
at Borrower's address set forth in the Section 43 of this Mortgage. While hereby
expressly reserving the priority of this Mortgage as established by law, Trustee
and Lender hereunder request that a copy of any Notice of Default and any Notice
of Sale under any deed of trust recorded against the Property either prior to,
or subsequent to the date this Mortgage is recorded be mailed to each at the
addresses set forth in Section 43 of this Mortgage.

                  (c)      FORECLOSURE BY POWER OF SALE. Should Lender elect to
foreclose by exercise of the Power of Sale herein contained, Lender shall notify
Trustee and shall deposit with Trustee this Mortgage and the Note and such
receipts and evidence of expenditures made and secured hereby as Trustee may
require. Thereafter, and only in accordance with or as permitted by the Nebraska
Trust Deeds Act:

                                                                 Omaha, Nebraska

                                       45


                           (1)      upon receipt of such notice from Lender,
         Trustee shall cause to be recorded, published and delivered to Trustor
         such Notice of Default and Notice of Sale and any other notice or
         document or instrument as then required by law and/or by this Deed of
         Trust. Trustee shall, without demand on Borrower, after such time as
         may then be required by law and after recordation and/or delivery of
         such Notice of Default, Notice of Sale and/or any other notice required
         by law, sell the Property at the time and place of sale fixed by it in
         such 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 Trustee
         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 a good and
         sufficient deed or deeds conveying the property so sold, but without
         any covenant or warranty, express or implied. Any person, including,
         without limitation, Lender (but specifically excluding the Borrower),
         may purchase at such sale, and Borrower hereby covenants to warrant and
         defend the title of such purchaser or purchasers; and

                           (2)      after deducting all costs, fees and expenses
         of Trustee and those allowed or permitted by the Loan Documents,
         including attorneys fees and costs of evidence of title in connection
         with sale, Trustee shall apply the proceeds of sale to payment of (i)
         all sums expended under the terms hereof, not then repaid, (ii) all
         other sums then secured hereby, and (iii) the remainder, if any, to the
         person or persons legally entitled thereto; and

                           (3)      Trustee may in the manner provided by law
         postpone sale of all or any portion of the Property.

                  (d)      RECONVEYANCE BY TRUSTEE. Upon written request of
Lender stating that all sums secured hereby have been paid, Trustee shall
reconvey to Borrower, or to the person or persons legally entitled thereto,
without warranty, any portion of the Property then held hereunder. The recitals
in such reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                                                 Omaha, Nebraska

                                       46


         IN WITNESS WHEREOF, Borrower has caused this Mortgage to be executed as
of the day and year first above written.

                                           BORROWER:

                                           OMAHA STORE NO. 166 L.L.C.,
                                           a Delaware limited liability company

                                           By:  AGREE LIMITED PARTNERSHIP,
                                                a Delaware limited partnership
                                                Its Member

                                                By:  AGREE REALTY CORPORATION,
                                                     a Maryland corporation
                                                     Its General Partner

                                                     By: /s/ Richard Agree
                                                         --------------------
                                                             Richard Agree
                                                             President

STATE OF                       )
                               )
COUNTY OF                      )

         The foregoing instrument was acknowledged before me this _____ day of
October, 2003, by RICHARD AGREE, President of Agree Realty Corporation, a
Maryland corporation, on behalf of the corporation as general partner of Agree
Limited Partnership, a Delaware partnership, as member of Omaha Store No. 166
L.L.C., a Delaware limited liability company.

                                      ------------------------------------------
                                      Name:
                                            ------------------------------------
                                      Notary Public
                                      My Commission Expires:
                                                             -------------------
                                      (SEAL)

                                                                 Omaha, Nebraska

                                      S-1



                                    EXHIBIT A

                               (Legal Description)

Lot 2, Cedarnole Replat 1, an addition to the City of Omaha, as surveyed,
platted and recorded in Douglas County, Nebraska; and

Lot 1, Cedarnole Replat 2, an addition to the City of Omaha, as surveyed,
platted and recorded in Douglas County, Nebraska.

                                                                 Omaha, Nebraska

                                     A - 1

EX-14.1

                                                                    EXHIBIT 14.1


                           CHIEF EXECUTIVE OFFICER AND
                             CHIEF FINANCIAL OFFICER
                           CODE OF PROFESSIONAL ETHIC

                                December 15, 2003
Preface

The Chief Executive Officer and the Chief Financial Officer (the "Officers")
hold important and elevated roles in corporate governance. The Officers are
vested with both the responsibility and authority to protect, balance and
preserve the interests of all of the Company's stakeholders, including
shareholders, clients, employees, suppliers and citizens of the communities in
which business is conducted. The Officers fulfill this responsibility by
prescribing and enforcing the polices and procedures employed in the operation
of the Company's financial organization, and by demonstrating the following:

I.  HONEST AND ETHICAL CONDUCT

        The Officers will exhibit and promote the highest standards of honest
and ethical conduct through the establishment and operation of policies and
procedures that:

        -    Encourage and reward professional integrity in all aspects of the
             financial organization, by eliminating inhibitions and barriers to
             responsible behavior, such as coercion, fear of reprisal, or
             alienation from the financial organization or the Company itself.

        -    Prohibit and eliminate the appearance or occurrence of conflicts
             between what is in the best interest of the Company and what could
             result in material personal gain for the Officers.

        -    Provide a mechanism for members of the finance organization to
             inform management of deviations in practice from policies and
             procedures governing honest and ethical behavior.








        -    Demonstrate their personal support for such policies and procedures
             through periodic communication reinforcing these ethical standards
             throughout the organization.

II.     FINANCIAL RECORDS AND PERIODIC REPORTS

         Senior Officers will establish and manage the Company's transaction and
reporting systems and procedures to ensure that:

        -    Business transactions are properly authorized and completely and
             accurately recorded on the Company's books and records in
             accordance with Generally Accepted Accounting Procedures ("GAAP")
             and established Company financial policy.

        -    The retention or proper disposal of Company records shall be in
             accordance with established Company financial polices and
             applicable legal and regulatory requirements.

        -    Periodic financial communications and reports will be delivered in
             a manner that facilitates the highest degree of clarity of content
             and meaning so that readers and users will quickly and accurately
             determine their significance and consequence.

III.     COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS

The Officers will establish and maintain mechanisms to:

        -    Educate members of the Company about any federal, state or local
             statute, regulation or administrative procedure that affects the
             operation of the finance organization and the Company generally.

        -    Monitor the compliance of the finance organization with any
             applicable federal, state or local statute, regulation or
             administrative rule.

        -    Identify, report and correct in a swift and certain manner, any
             detected deviations from applicable federal, state or local statute
             or regulation.


Accepted and acknowledged:                        /s/ Richard Agree
                                                  -------------------------
                                                  Richard Agree


                                                  /s/ Kenneth R. Howe
                                                  -------------------------
                                                  Kenneth R. Howe

EX-21.1

                                                                    EXHIBIT 21.1



                            AGREE REALTY CORPORATION
             SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 2003


Agree Realty Corporation; through its Operating Partnership, Agree Limited
Partnership, is the sole member of the following Limited Liability Companies:

SUBSIDIARY                                  JURISDICTION OF ORGANIZATION

Agree -- Columbia Crossing
  Project, L.L.C.                           Delaware

Agree -- Milestone Center
  Project, L.L.C.                           Delaware

Agree Facility No. 1, L.L.C.                Delaware

Tulsa Store No. 264, L.L.C.                 Delaware

Mt Pleasant Shopping Center L.L.C.          Michigan

ALPSC Associates, LLC                       South Carolina

Oklahoma City Store No. 151, L.L.C.         Delaware

Omaha Store No. 166, L.L.C.                 Delaware

Indianapolis Store No. 16, L.L.C.           Delaware

AMCP Germantown LLC                         Delaware

ACCP Maryland LLC                           Delaware

Agree Realty Corporation, through its Operating Partnership, Agree Limited
Partnership, owns a 99% interest in the following Limited Liability Company:


Lawrence Store No. 203, L.L.C.              Delaware

EX-23

                                                                      EXHIBIT 23



                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS



Agree Realty Corporation
Farmington Hills, Michigan


We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-21293) of Agree Realty Corporation of our report
dated February 13, 2004 relating to the consolidated financial statements, which
appears in the Annual Report to Shareholders, which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report dated February 13, 2004 relating to the financial statement schedule,
which appears in this Form 10-K.



BDO Seidman, LLP
Troy, Michigan
March 10, 2004

EX-31.1

                                                                    EXHIBIT 31.1

    CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


    I, Richard Agree, certify that:


         1. I have reviewed this annual report on Form 10-K of Agree Realty
         Corporation;

         2. Based on my knowledge, this annual report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this annual report;

         3. Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

         4. The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
         based on our most recent evaluation, to the registrant's auditors and
         the audit committee of registrant's board of directors (or persons
         performing the equivalent function):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

         6. The registrant's other certifying officers and I have indicated in
         this annual report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


    Date: March 12, 2004                  /s/ Richard Agree
    ---------------------                 -----------------

                                          Name: Richard Agree
                                          Title: President and Chief Executive
                                                 Officer

EX-31.2

                                                                    EXHIBIT 31.2




     CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Kenneth R. Howe, certify that:


         1. I have reviewed this annual report on Form 10-K of Agree Realty
         Corporation;

         2. Based on my knowledge, this annual report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this annual report;

         3. Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

         4. The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
         based on our most recent evaluation, to the registrant's auditors and
         the audit committee of registrant's board of directors (or persons
         performing the equivalent function):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

         6. The registrant's other certifying officers and I have indicated in
         this annual report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Date: March 12, 2004                      /s/ Kenneth R. Howe
- ---------------------------               -------------------
                                          Name: Kenneth R. Howe
                                          Title: Vice President, Finance

EX-32.1

                                                                    EXHIBIT 32.1



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of Agree Realty Corporation (the "Company")
on Form 10-K for the year ending December 31, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Richard Agree,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:



        1.   The Report fully complies with the requirements of Section 13(a) or
             15(d) of the Securities Exchange Act of 1934; and


        2.   The information contained in the Report fairy presents, in all
             material respects, the financial condition and results of
             operations of the Company.




  /s/ RICHARD AGREE
- -----------------------
Richard Agree
Chief Executive Officer

March 12, 2004

EX-32.2

                                                                    EXHIBIT 32.2



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of Agree Realty Corporation (the "Company")
on Form 10-K for the period ending December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Kenneth
R. Howe, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 that:



        1.   The Report fully complies with the requirements of Section 13(a) or
             15(d) of the Securities Exchange Act of 1934; and


        2.   The information contained in the Report fairy presents, in all
             material respects, the financial condition and results of
             operations of the Company.





  /s/ KENNETH R. HOWE
- -----------------------
Kenneth R. Howe
Chief Financial Officer

March 12, 2004